annual report 2011 - people's choice credit union · independent auditor’s report 12 - 13...

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Australian Central Credit Union Ltd (trading as People’s Choice Credit Union) and its Controlled Entities Annual Financial Report for the year ended 30 June 2011

Annual Report 2011Australian Central Credit Union Ltd (trading as People’s Choice Credit Union) and its Controlled Entities

I’m choosing an organisation where I have a say in its future.

I choose the organisation that gives back to the community.

I’m choosing the credit union that cares more about people than profit.

My choice is the financial institution that is run by members, not by numbers.

I’ve chosen a genuine alternative to the banks.

I chose the credit union that offers a real choice inbanking.


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Content

Directors’ Report 4 - 6

Lead Auditor’s Independence Declaration 7 - 7

Corporate Governance Statement 8 - 11

Independent Auditor’s Report 12 - 13

Directors’ Declaration 14 - 14

Statements of Financial Position 15 - 15

Statements of Comprehensive Income 16 - 16

Statements of Changes in Equity 17 - 18

Statements of Cash Flows 19 - 19

Notes to the Financial Statements 20 - 64


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AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union) AND ITS CONTROLLED ENTITIESDIRECTORS' REPORTFOR THE YEAR ENDED 30 JUNE 2011

DIRECTORS

William Raymond Cossey AMNON-EXECUTIVE CHAIRB.Sc., MAICD

John Leonard CossonsNON-EXECUTIVE DEPUTY CHAIRFAMI, MAICD

Peter Hans Torsten EversEXECUTIVE DIRECTORBA (Acc), FCPA, FAICD, SF Fin

Dr Rosemary Helen Simon BrooksNON-EXECUTIVE DIRECTORPhD, MBA, MA, BA (Hons), LLB (Hons), GDLP, FAICD, FAMI, JP

Stephen Mark DayNON-EXECUTIVE DIRECTORB.Bus, Grad Dip (Applied Finance and Investment), FAICD, SA Fin

Edward Terrence McGuirkNON-EXECUTIVE DIRECTORBA (Hons), FAICD, AFAMI, SA Fin

Jan McMahonNON-EXECUTIVE DIRECTORBA (Hons.), FAICD, AFAMI

Kathryn Anne Skipper AMNON-EXECUTIVE DIRECTORDip. Nursing, FAICD, FAIM

CORPORATE SECRETARY

PRINCIPAL ACTIVITIES

The Directors present their report together with the financial report of Australian Central Credit Union Ltd (the "Holding Entity"), (tradingas People's Choice Credit Union) and the consolidated financial report of the Consolidated Entity, being the Holding Entity and itscontrolled entities, for the year ended 30 June 2011 and the auditor's report thereon.

The Directors of the Holding Entity at any time during or since the end of the financial year are:

Details of Directors, their experience and any special responsibilities, are set out in the Online Annual Report, which is available from ourwebsite at www.peopleschoicecu.com.au. Organisations with which certain Directors have associations, also set out in the OnlineAnnual Report, conduct business with the Holding Entity on standard terms and conditions.

Directors were in office from the beginning of the financial year until the date of this report.

The number of Directors' meetings (including meetings of committees of Directors) and number of meetings attended by each of theDirectors during the financial year is shown in the Corporate Governance Statement commencing on page 6.

Mr Ross Mallett JD GDLP BBus MAICD FCIS FCPA was appointed to the position of Corporate Secretary on 18 March 2011. Mr Mallettwas appointed to the position of Corporate Secretary after the resignation of Mr Paul Albert Macdonald on 7 December 2010. Mr PeterEvers continues to act as an alternate Corporate Secretary.

The principal activities of the Consolidated Entity during the year were the provision of loans to members and customers (including"Choice of Home Loans" via a panel of lenders), savings and investment facilities, the sale of insurance policies, Mutual Aid, financialplanning and corporate superannuation services. There was no significant change in the nature of these activities during the year.

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Directors’ Report

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AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union) AND ITS CONTROLLED ENTITIESDIRECTORS' REPORTFOR THE YEAR ENDED 30 JUNE 2011

DIRECTORS

William Raymond Cossey AMNON-EXECUTIVE CHAIRB.Sc., MAICD

John Leonard CossonsNON-EXECUTIVE DEPUTY CHAIRFAMI, MAICD

Peter Hans Torsten EversEXECUTIVE DIRECTORBA (Acc), FCPA, FAICD, SF Fin

Dr Rosemary Helen Simon BrooksNON-EXECUTIVE DIRECTORPhD, MBA, MA, BA (Hons), LLB (Hons), GDLP, FAICD, FAMI, JP

Stephen Mark DayNON-EXECUTIVE DIRECTORB.Bus, Grad Dip (Applied Finance and Investment), FAICD, SA Fin

Edward Terrence McGuirkNON-EXECUTIVE DIRECTORBA (Hons), FAICD, AFAMI, SA Fin

Jan McMahonNON-EXECUTIVE DIRECTORBA (Hons.), FAICD, AFAMI

Kathryn Anne Skipper AMNON-EXECUTIVE DIRECTORDip. Nursing, FAICD, FAIM

CORPORATE SECRETARY

PRINCIPAL ACTIVITIES

The Directors present their report together with the financial report of Australian Central Credit Union Ltd (the "Holding Entity"), (tradingas People's Choice Credit Union) and the consolidated financial report of the Consolidated Entity, being the Holding Entity and itscontrolled entities, for the year ended 30 June 2011 and the auditor's report thereon.

The Directors of the Holding Entity at any time during or since the end of the financial year are:

Details of Directors, their experience and any special responsibilities, are set out in the Online Annual Report, which is available from ourwebsite at www.peopleschoicecu.com.au. Organisations with which certain Directors have associations, also set out in the OnlineAnnual Report, conduct business with the Holding Entity on standard terms and conditions.

Directors were in office from the beginning of the financial year until the date of this report.

The number of Directors' meetings (including meetings of committees of Directors) and number of meetings attended by each of theDirectors during the financial year is shown in the Corporate Governance Statement commencing on page 6.

Mr Ross Mallett JD GDLP BBus MAICD FCIS FCPA was appointed to the position of Corporate Secretary on 18 March 2011. Mr Mallettwas appointed to the position of Corporate Secretary after the resignation of Mr Paul Albert Macdonald on 7 December 2010. Mr PeterEvers continues to act as an alternate Corporate Secretary.

The principal activities of the Consolidated Entity during the year were the provision of loans to members and customers (including"Choice of Home Loans" via a panel of lenders), savings and investment facilities, the sale of insurance policies, Mutual Aid, financialplanning and corporate superannuation services. There was no significant change in the nature of these activities during the year.

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Directors’ ReportAUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)

AND ITS CONTROLLED ENTITIES

DIRECTORS' REPORT

FOR THE YEAR ENDED 30 JUNE 2011

DIVIDENDS

REVIEW OF OPERATIONS

STATE OF AFFAIRS

DIRECTORS' INTERESTS

EVENTS SUBSEQUENT TO THE REPORTING DATE

LIKELY DEVELOPMENTS

INDEMNIFICATION AND INSURANCE OF OFFICERS

A significant milestone in the Credit Union's merger integration was reached in March 2011 when the banking systems of the twoheritage credit unions were brought together onto one banking platform. This has enabled members to access their finances through allbranches, one contact centre and a single internet banking system.

The 2011 financial year's disclosures are the first full financial year of the merged entity's operations. The 2010 comparative financialyear comprises a full 12 month result of Australian Central Credit Union Limited and 7 months contribution from Savings & Loans CreditUnion (S.A.) Limited (being from the date of the merger, 1 December 2009, to 30 June 2010). The current year performance has beendisclosed below with a comparison to the prior year, however these need to be considered in the context of the merger impacts in theprior year as outlined above.

The Holding Entity's Constitution prohibits the payment of dividends on member shares.

The Consolidated Entity recorded a profit after tax for the year ended 30 June 2011 of $33.039 million (2010: $22.983 million). Totalconsolidated on balance sheet assets reached $6.064 billion (2010: $6.006 billion), representing an increase of $57.708 million (0.96%)from 30 June 2010. On balance sheet personal and residential disbursements for the twelve months ended 30 June 2011 reached$786.118 million (2010: $407.149 million) and mortgages under advice off balance sheet grew by 6.33% to $683.558 million during theyear (2010: $642.843 million).

Another important milestone was reached on 27 June 2011 when members voted at a General Meeting to approve the use of 'People'sChoice Credit Union' as the new trading name for the credit union.

On 31 July 2010 the Holding Entity repaid in full a $5.000 million Series 3 Subordinated Capital Notes issue maturing 31 July 2015. Therepayment of the issue was the result of the Holding Entity exercising its option under the Trust Deed to repay the entire face value ofthese notes to registered holders on 31 July 2010.

In the opinion of the Directors other than the events above, there have been no significant changes in the state of affairs of theConsolidated Entity that occurred during the financial year under review not otherwise disclosed in this report or the consolidatedfinancial statements.

None of the above Directors has declared any interest in existing or proposed contracts with the Holding Entity since 1 July 2010.

There has not arisen in the interval between the end of the financial year and the date of this report, any item, transaction or event of amaterial and unusual nature likely, in the opinion of the Directors of the Holding Entity, to affect significantly the operations of theConsolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years.

In the course of meeting its goals the Consolidated Entity will continue to pursue profitable market share growth whilst maintainingefficient and effective business operations. The size and strength the Holding Entity will gain from the merger will create many newefficiencies and opportunities which will directly result in enhanced value for members including an improved range of products andservices, as well as a broader network of branches.

Further information as to likely developments in the operations of the Consolidated Entity and the expected results of those operations insubsequent financial years has not been included in this report because disclosure of the information would be likely to result inunreasonable prejudice to the Consolidated Entity.

During the period, the Holding Entity paid a premium in relation to a Directors & Officers liability insurance policy indemnifying theDirectors and its Executives against certain liabilities.

The insurance contract prohibits the disclosure of the nature of the liabilities insured against and the premium paid in respect of thatinsurance.

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AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)


DIRECTORS' REPORT


ROUNDING OFF

Signed at Adelaide this 29th day of August, 2011in accordance with a resolution of the Board of Directors of the Holding Entity.

W. R. COSSEY AM P.H.T. EVERSChair Managing Director

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amountsin the financial report and Directors' Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

LEAD AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT

The Lead Auditor's Independence Declaration is set out on page 5 and forms part of the Directors' Report for the year ended 30 June2011.

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Directors’ Report

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Lead Auditor’s Independence Declaration


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AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union) AND ITS CONTROLLED ENTITIESCORPORATE GOVERNANCE STATEMENTFOR THE YEAR ENDED 30 JUNE 2011

HOW WE DO BUSINESS

ROLE OF THE BOARD

In particular, the Board: • provides strategic direction to the Credit Union; • provides leadership in terms of corporate governance; • appoints and manages the performance of the Managing Director; • reports to members and monitors compliance with regulatory requirements; • approves the remuneration of the Managing Director, executive managers and other designated persons in accordance with the Board Remuneration Policy and APRA's Prudential Standards; • oversees the Credit Union's financial performance and position and monitors its business and affairs on behalf of all members; • oversees internal controls and processes for identifying areas of significant business risk; • makes decisions in relation to major expenditures, acquisitions or merger opportunities; • ensures that the Credit Union's business is conducted ethically and transparently.

Responsibility for day-to-day activities is delegated to the Managing Director by the Board.

STRUCTURE OF THE BOARD

The Credit Union's Board and Management are committed to acting responsibly, ethically and with the highest standards of integrity toensure that the Credit Union's activities are continually structured and delivered in a manner that allows us to meet the needs of ourmembers.

A principles based approach is taken to achieve sound corporate governance and business practices. To achieve this, policies havebeen adopted by the Board and cascaded throughout all levels of the Credit Union. We strive to ensure that our governance "in action"is of the highest standard, consistent with our mutual underpinnings, while at the same time practical and transparent to our members.

The Board has committed to following the Australian Securities Exchange Corporate Governance Council's "Principles of GoodCorporate Governance and Best Practice Recommendations" to the extent that they are applicable to People's Choice Credit Union asa mutual organisation and appropriate for the Credit Union. Further the Board has carefully considered and implemented a "fit andproper" framework in accordance with relevant legislation, that endeavours to ensure that Directors and Senior Management areappropriate persons to lead the Credit Union. The "fit and proper" framework deals with matters such as minimum competencies,Director development, independence, Director refreshment and renewal and performance.

The Board comprises a majority of Non-Executive Directors, who together with the Managing Director have extensive business acumenand bring accountability and judgement to the Board's deliberations to ensure optimum benefit to members, employees and the widercommunity. The role and responsibilities of the Board are set out in the Board Charter a copy of which is published on our website.

The size and composition of the Board is determined by the Board subject to the limits set out in the Credit Union's constitution, whichrequires a minimum of four member elected Non-Executive Directors. The constitution also allows for Board and merger appointed Non-Executive Directors, or a Managing Director. At all times, member elected Directors must constitute a majority of Directors, arequirement which protects our mutuality.

The Corporate Governance Committee reviews the independence of each Non-Executive Director on an annual basis. All Non-Executive Directors have been determined to be independent.

The Board currently comprises seven Non-Executive Directors, six of whom are member elected and one Board appointed Director (MrDay) and one Managing Director (Mr Evers), ensuring independence and objectivity. All Directors are shareholding members of theCredit Union. Board members are elected by the members or appointed in accordance with the constitution. The Chair of the Board is amember elected Non-Executive Director. Generally all elected Directors are appointed for a term of three years upon election howeveras part of the merger with Savings & Loans, transitional amendments to the constitution were made to specify Directors who weredeemed elected and the end date of their term.

The above framework operates to ensure that the Board is able to function independently of Executive Management.

Refer to Page 2 of this financial report for the names of Directors who held office during or since the end of the financial year.

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Corporate Governance Statement

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AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union) AND ITS CONTROLLED ENTITIESCORPORATE GOVERNANCE STATEMENTFOR THE YEAR ENDED 30 JUNE 2011

HOW WE DO BUSINESS

ROLE OF THE BOARD

In particular, the Board: • provides strategic direction to the Credit Union; • provides leadership in terms of corporate governance; • appoints and manages the performance of the Managing Director; • reports to members and monitors compliance with regulatory requirements; • approves the remuneration of the Managing Director, executive managers and other designated persons in accordance with the Board Remuneration Policy and APRA's Prudential Standards; • oversees the Credit Union's financial performance and position and monitors its business and affairs on behalf of all members; • oversees internal controls and processes for identifying areas of significant business risk; • makes decisions in relation to major expenditures, acquisitions or merger opportunities; • ensures that the Credit Union's business is conducted ethically and transparently.

Responsibility for day-to-day activities is delegated to the Managing Director by the Board.

STRUCTURE OF THE BOARD

The Credit Union's Board and Management are committed to acting responsibly, ethically and with the highest standards of integrity toensure that the Credit Union's activities are continually structured and delivered in a manner that allows us to meet the needs of ourmembers.

A principles based approach is taken to achieve sound corporate governance and business practices. To achieve this, policies havebeen adopted by the Board and cascaded throughout all levels of the Credit Union. We strive to ensure that our governance "in action"is of the highest standard, consistent with our mutual underpinnings, while at the same time practical and transparent to our members.

The Board has committed to following the Australian Securities Exchange Corporate Governance Council's "Principles of GoodCorporate Governance and Best Practice Recommendations" to the extent that they are applicable to People's Choice Credit Union asa mutual organisation and appropriate for the Credit Union. Further the Board has carefully considered and implemented a "fit andproper" framework in accordance with relevant legislation, that endeavours to ensure that Directors and Senior Management areappropriate persons to lead the Credit Union. The "fit and proper" framework deals with matters such as minimum competencies,Director development, independence, Director refreshment and renewal and performance.

The Board comprises a majority of Non-Executive Directors, who together with the Managing Director have extensive business acumenand bring accountability and judgement to the Board's deliberations to ensure optimum benefit to members, employees and the widercommunity. The role and responsibilities of the Board are set out in the Board Charter a copy of which is published on our website.

The size and composition of the Board is determined by the Board subject to the limits set out in the Credit Union's constitution, whichrequires a minimum of four member elected Non-Executive Directors. The constitution also allows for Board and merger appointed Non-Executive Directors, or a Managing Director. At all times, member elected Directors must constitute a majority of Directors, arequirement which protects our mutuality.

The Corporate Governance Committee reviews the independence of each Non-Executive Director on an annual basis. All Non-Executive Directors have been determined to be independent.

The Board currently comprises seven Non-Executive Directors, six of whom are member elected and one Board appointed Director (MrDay) and one Managing Director (Mr Evers), ensuring independence and objectivity. All Directors are shareholding members of theCredit Union. Board members are elected by the members or appointed in accordance with the constitution. The Chair of the Board is amember elected Non-Executive Director. Generally all elected Directors are appointed for a term of three years upon election howeveras part of the merger with Savings & Loans, transitional amendments to the constitution were made to specify Directors who weredeemed elected and the end date of their term.

The above framework operates to ensure that the Board is able to function independently of Executive Management.

Refer to Page 2 of this financial report for the names of Directors who held office during or since the end of the financial year.

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Corporate Governance StatementAUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)


CORPORATE GOVERNANCE STATEMENT


STRUCTURE OF THE BOARD (Continued)

Minimum Competencies

Independence

Director Development

Refreshment and Renewal

Performance

COMMITTEES OF THE BOARD

Relevant Board policy outlines the knowledge requirements for Directors and provides the high level guidelines for new Directorinduction, new committee member induction as well as the standards for ongoing Director development. As part of the developmentprogram each Director is expected to attend at least one industry related conference annually.

Board policy sets out the minimum competencies regarding personal attributes, skills and knowledge that each Director should bring tothe Credit Union. The Nominations Committee in forming its view assesses all election candidates with regard to these minimumcompetencies. During the year the Board commenced a review of the skills, experience and diversity of Directors to determine if therewere any gaps that needed to be filled either through Director development, additional appointments or by bringing in the expertise asand when required. The skills review will continue during the 2011/12 financial year.

As a behavioural principle, Directors are required to be independent in both judgement and action. Each Director is required to maintainand demonstrate this independence of thought and action at all times while acting in the role of Director. Board policy also addressesissues relating to Director benefits and conflicts of interest. Directors generally are not permitted to offer, seek or accept benefits in theperformance of their duties and any unsolicited benefits received are to be disclosed at the following Board meeting. Where a Directorhas a material personal interest in a matter, that Director is required to disclose the interest and leave the meeting during theconsideration of, or voting on, that matter.

Individual Directors are required on a regular basis to refresh and renew their knowledge generally and specific to the Credit Union andthe environment in which it operates. Board policy requires that each Director must be able to demonstrate his/her own refreshment andrenewal process to the Board and relevant third parties as needed. Refreshment and renewal are also included as part of an individualDirector's performance assessment. In accordance with Board policy the Corporate Governance Committee is required to undertake areview of the Board’s refreshment and renewal where effective change in the composition of the Board has not occurred over a threeyears period.

The Board conducts an annual review of its performance, its committees and individual Directors including the Chair. The performancereviews are undertaken via a survey of relevant questions completed by Directors and where appropriate Executive Managers. Wholeof Board review findings are then discussed by Directors and development plans formulated at a subsequent meeting as are committeefindings at the next committee meeting. Findings from individual Director surveys are discussed on a confidential basis between eachDirector and the Chair and findings from the Chair's review are discussed between the Chair and the Audit Committee Chair.Performance reviews of the Board as a whole, Board Committees, the Chair and individual Directors were commenced during the year.

The Board has established three standing committees as described below to consider detailed matters. Generally committees considerthe various matters and make recommendations to the Board, however some decisions, within the parameters of Board policy, havebeen delegated to committees. Each committee's authority and responsibilities are set out in their individual terms of reference, asapproved by the Board. Other committees may be established from time to time to consider matters of particular importance.Committee members are chosen for the skills, experience and other relevant qualities they bring to the committee.

The committees generally meet to consider and make recommendations or decisions on matters within their terms of reference.Committee Chairs give verbal reports to the Board at the next Board meeting, and minutes of all committee meetings are reviewed bythe Board. All information prepared for the consideration of committees is also available to the Board.

Standing committees in operation at any time during or since the end of the financial year were:

Audit Committee - the Committee meets at least quarterly and assists the Board in fulfilling its responsibilities relating to the audit,

accounting, and reporting obligations, monitoring compliance with the established policies of the Credit Union, monitoring internal andexternal auditors (including the independence of the internal and external auditors). This committee has a number of particularrequirements which include that the Chair of the committee cannot be the Chair of the Board and that the committee can and did meetwith the internal and/or External Auditors without the presence of the Managing Director or Management.

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COMMITTEES OF THE BOARD (Continued)

STANDARDS

••••

•

•

•

••

•

DIVERSITY

Male % Female % Total

5 63 3 37 8

4 57 3 43 7

71 47 81 53 152210 23 707 77 917

290 27 794 73 1,084

INTERNAL AUDIT

INTERNAL AND EXTERNAL AUDIT INDEPENDENCE

an annual review of Board performance;

Corporate Governance Committee - the Committee meets bi-monthly and assists the Board in adopting and implementing good

corporate governance in the areas of the Managing Director's appointment, Non-Executive Director appointment, remuneration,recommending to the Board management remuneration levels in accordance with the Board Remuneration Policy, Director elections,Board performance reviews, oversight of the "fit and proper" framework, monitoring the size and composition of the Board andreviewing Executive and Director succession plans. A Nominations Committee is established in association with Director elections, andoperates under the guidance of the Corporate Governance Committee.

Risk Committee - The Risk Committee meets bi-monthly and ensures that the Credit Union adopts an integrated approach to risk

management including treasury risk management and capital management dealing with all risks of the portfolio including those to dowith the balance sheet and interest rates, credit risk that arises in the credit portfolio, operational risk management including regulatoryrisk management as part of the day to day conduct of the business and alignment with prudential standards.

The Board acknowledges the need for, and continued maintenance of the highest standards of corporate governance and thereforeadopts practices including:

a Code of Conduct that applies to all staff, Management and Directors;

The Board is committed to diversity and the promotion of an environment conducive to the appointment of well qualified employees,senior managers and Directors. The Credit Union is in the process of updating its diversity policy and is considering the merits ofadopting the ASX Corporate Governance recommendations on diversity. At present the gender breakdown in the organisation is asfollows:

active participation by all Directors at all meetings and open access to information;regular Executive Management presentations;the Managing Director, General Manager Risk and General Manager Finance and Treasury and the Senior Manager Financeprovide an assurance statement on the accuracy and completeness of financial information and risk management processes;the Executive Managers provide assurance to the Board that the business of the Credit Union has been conducted ethically and alldealings have been conducted transparently with the Board;

The Credit Union's Internal Audit Services department assists the Board via the Audit Committee in reviewing, reporting and makingrecommendations on the existence, effectiveness and efficiency of internal controls and compliance with internal controls andregulatory requirements. The Audit Committee is responsible for approving the program and scope of internal and external AuditServices activities each financial year.

the transparency of information to members through publication of regulatory notices on the Credit Union's websitewww.peopleschoicecu.com.au;the gearing of Board Policies towards risk management to safeguard the assets and interests of the Credit Union;Non-Executive Director remuneration approved by members at the Annual General Meeting. The Board undertakes benchmarkingand/or seeks independent advice to determine recommended Non-Executive Director remuneration levels;allowing Non-Executive Directors to seek independent professional advice at the expense of the Credit Union..

Board members

Executive managers

Other managersOther employees

Total workforce

The Audit Committee oversees, and makes recommendations to the Board on, the appointment of the Credit Union's External Auditors.In addition, the appointment or dismissal of the head of Internal Audit is subject to endorsement by the Audit Committee Chair.

The External Auditors were appointed in 1997. The current lead External Audit engagement partner was appointed in June 2008 and isdue for rotation in 2012. The rotation of lead External Audit engagement partner is overseen by the Audit Committee.

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INTERNAL AND EXTERNAL AUDIT INDEPENDENCE (Continued)

REMUNERATION OF THE BOARD

MEETINGS OF THE BOARD AND BOARD COMMITTEES

DirectorType

A * B A B A B A BDirector

M 15 15 - - 6 6 - - M 15 15 - - 6 6 6 6E 15 15 - - - - - -

Dr R.H.S. Brooks M 15 12 6 6 - - - - S.M. Day B 15 15 - - - - 6 6E.T. McGuirk M 15 15 6 6 - - - - J. McMahon M 15 15 6 6 - - 6 6K.A. Skipper AM M 15 13 - - 6 6 - - * Twelve scheduled Board meetings and three special Board meetings were held during the year.

B - The number of meetings attended by the Director.M - Member elected Directors.E - Executive Director.B - Board appointed Directors.

The following leaves of absence were granted by the Board:

Director Dr R.H.S. BrooksK. A. Skipper AM

Risk

W. R. Cossey AM (Chair)

The Audit Committee closely monitors the independence of the External Auditors and regularly reviews the independence safeguardsput in place by the External Auditors.

During the course of the financial year the Audit Committee meets with the Internal Auditor without the External Auditors or othermembers of management being present and with the External Auditors without the Internal Auditor or members of management beingpresent.

The Corporate Governance Committee assists the Board in determining the aggregate level of remuneration of Non-ExecutiveDirectors to be recommended for approval by members at the Annual General Meeting following benchmarking and/or receipt ofindependent advice.

The membership and details of attendances at meetings of the Credit Union's Board and Committees are outlined below:

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CorporateBoard Audit Governance

J.L. Cossons (Deputy Chair) P.H.T. Evers (Managing Director)

A - The number of meetings held during the period the Director was a member of the Board or Board Committee.

Number of Board and

Committee Meetings

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Independent Auditor’s Report

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Independent Auditor’s Report


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DIRECTORS' DECLARATION


DIRECTORS' DECLARATION

In the opinion of the Directors of the Holding Entity:

a)

(i)

(ii)

b) the financial statements also comply with the International Financial Reporting Standards as disclosed in Note 1;

c)

Signed at Adelaide this 29th day of August, 2011

in accordance with a resolution of the Board of Directors of the Holding Entity.

W. R. COSSEY AM P.H.T. EVERS

Chair Managing Director

the financial statements and notes of the Holding Entity and of the Consolidated Entity, set out on pages 13 to 62 are in

accordance with the Corporations Act 2001, including:

giving a true and fair view of the Holding Entity's and the Consolidated Entity's financial position as at 30 June 2011

and of their performance, for the financial year ended on that date;

complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the

Corporations Regulations 2001;

there are reasonable grounds to believe that the Holding Entity will be able to pay its debts as and when they become due

and payable.

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Directors’ Declaration

15 to 64

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Statements of Financial Position

Annual Financial Report as at 30 June 2011AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)


STATEMENTS OF FINANCIAL POSITION

AS AT 30 JUNE 2011

2011 2010 2011 2010

Note $'000 $'000 $'000 $'000

Assets

Cash and cash equivalents 10 149,968 38,132 162,775 44,982 Trade and other receivables 11 21,771 29,860 22,026 28,408 Loans and advances 12 4,945,994 4,979,923 4,945,994 4,979,923 Investments: Available-for-Sale investment securities 14 831,899 817,368 842,149 822,627 Held-to-Maturity investment securities 14 - 35,850 - 35,850 Other investments 14 48,930 31,252 13,082 12,905 Property, plant and equipment 15 32,225 36,336 32,227 36,505 Deferred tax assets 16 16,439 21,734 15,522 19,325 Intangible assets 17 16,257 14,489 24,592 22,824 Other financial assets 18 3,302 8,220 324 107 Other assets 19 5,052 2,562 5,087 2,614

Total Assets 6,071,837 6,015,726 6,063,778 6,006,070

Liabilities

Deposits 20 4,003,242 3,935,050 4,002,816 3,934,728 Other financial liabilities 21 13,673 22,622 11,085 22,622 Trade and other payables 22 782,278 452,694 101,086 92,898 Borrowings 23 861,211 1,222,965 861,211 1,222,965 Notes payable 24 - - 673,400 350,030 Current tax payable 25 5,952 4,926 6,307 5,266 Deferred tax liabilities 26 7,629 10,716 6,672 8,282 Employee benefits 27 13,502 12,128 13,614 12,199 Subordinated debt 28 - 5,000 - 5,000

Total Liabilities 5,687,487 5,666,101 5,676,191 5,653,990

Net Assets 384,350 349,625 387,587 352,080

Equity

Redeemed preference share capital 29 507 489 507 489 General reserve for credit losses 8,193 8,193 8,193 8,193 Hedging reserve - cash flow hedges (2,536) (5,961) (2,536) (5,961)Asset revaluation reserve 122 287 128 293 Fair Value Reserve - Available For Sale Financial Assets 650 1,433 650 1,442 Other equity reserves 171,745 171,745 171,745 171,745 Retained earnings 205,669 173,439 208,900 175,879 Total Equity attributable to members of the Holding Entity 384,350 349,625 387,587 352,080

Total Equity 384,350 349,625 387,587 352,080

The Statements of Financial Position are to be read in conjunction with the accompanying notes to the financial statements.

Credit Union Consolidated

13


An

nu

al R

epor

t 20

1116

Statements of Comprehensive Income



STATEMENTS OF COMPREHENSIVE INCOME


Note

2011 2010 2011 2010$'000 $'000 $'000 $'000

Interest income 2,3 422,578 299,237 421,998 299,146 Interest expense 2,3 (284,215) (197,830) (281,541) (196,358)Net interest income 138,363 101,407 140,457 102,788

Non-interest income 4 71,876 56,824 73,126 58,671 Non-interest income 71,876 56,824 73,126 58,671

Impairment losses on loans and advances 5 (2,848) (2,490) (2,848) (2,490)Other expenses 6 (163,650) (124,713) (165,862) (126,763)

Profit before tax 43,741 31,028 44,873 32,206

Income tax expense 8 (11,493) (8,870) (11,834) (9,223)

Profit for the year 32,248 22,158 33,039 22,983

Other comprehensive income

Cash flow hedges:

to profit or loss 13,452 22,898 13,452 22,898 (8,559) (9,846) (8,559) (9,846)

(948) 1,433 (957) 1,442 Revaluation of property, plant and equipment - 175 - 175 Income tax (expense)/benefit on items of other

(1,468) (3,968) (1,468) (3,968)

2,477 10,692 2,468 10,701

Total comprehensive income for the year 34,725 32,850 35,507 33,684

Profit attributable to:Members of the Holding Entity 32,248 22,158 33,039 22,983

Total comprehensive income attributable to:Members of the Holding Entity 34,725 32,850 35,507 33,684


Other comprehensive income for the year, net of tax

Net change in fair value of cash flow hedges transferred

comprehensive income

Effective portion of changes in fair value of cash flow hedges Changes in fair value of Available-for-Sale financial assets

The Statements of Comprehensive Income are to be read in conjunction with the accompanying notes to the financial statements.

14

17

An

nu

al R

epor

t 20

11


Sta

tem

ents

of C

han

ges

in

Equ

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Aus

tral

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Jun

e 20

11A

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TR

AL

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ION

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15


An

nu

al R

epor

t 20

1118

Sta

tem

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of C

han

ges

in

Equ

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Aus

tral

ian

Cent

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t Uni

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td (t

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dit U

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s

Ann

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inan

cial

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or th

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ar e

nded

30

Jun

e 20

11

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ST

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LIA

N C

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IT U

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cco

mp

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yin

g n

ote

s to

th

e fin

an

cia

l sta

tem

en

ts.

16

19

An

nu

al R

epor

t 20

11


Statements of Cash Flows

AU

ST

RA

LIA

N C

EN

TR

AL

CR

ED

IT U

NIO

N L

TD

(tr

ad

ing

as

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pre

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are

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13

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44

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me

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-

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58

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of ch

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ge

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,89

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)C

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1

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16

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in fa

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of p

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eq

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,43

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-

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-

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37

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21

,43

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2

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0

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em

be

rs r

ec

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t ca

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l re

se

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sta

blis

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n m

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er

with

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n (

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.)

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imite

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17

1,7

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71

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5)

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nsfe

r to

re

se

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29

16

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90

65

8

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sin

g b

ala

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e a

t 3

0 J

un

e 2

01

04

89

8,1

93

(5,9

61

)2

87

1,4

33

17

1,7

45

17

3,4

39

34

9,6

25

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ns

olid

ate

d E

nti

ty 2

01

0

Re

de

em

ed

pre

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nce

sh

are

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fo

r

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dit

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dg

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se

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ca

sh

flo

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s

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ir V

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ese

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-

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ilab

le F

or

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le

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an

cia

l Asse

ts

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er

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uity

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s

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ed

ea

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gs

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tal

No

te$

'00

0$

'00

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0$

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0$

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0$

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0

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ing

ba

lan

ce

at

1 J

uly

20

09

44

13

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6(1

5,1

27

)6

-

-

15

6,8

63

14

5,8

79

To

tal c

om

pre

he

ns

ive

in

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me

fo

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ss

-

-

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-

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22

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32

2,9

83

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er

co

mp

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me

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ctiv

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ion

of ch

an

ge

s in

fa

ir v

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e o

f ca

sh

flo

w h

ed

ge

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x -

-

(6

,89

2)

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(6,8

92

)C

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ir v

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w h

ed

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s tra

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ss, n

et o

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x -

-

1

6,0

29

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et ch

an

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in fa

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or-

sa

le fin

an

cia

l asse

ts, n

et o

f ta

x-

-

-

-

1,4

42

-

-

1,4

42

Re

va

lua

tion

of p

rop

ert

y, p

lan

t a

nd

eq

uip

me

nt, n

et o

f ta

x-

-

-

12

2 -

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12

2T

ota

l o

the

r c

om

pre

he

ns

ive

in

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me

-

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9,1

37

12

21

,44

2 -

-

1

0,7

01

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tal c

om

pre

he

ns

ive

in

co

me

fo

r th

e p

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od

-

-

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37

12

21

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2 -

2

2,9

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4

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ns

ac

tio

ns

wit

h m

em

be

rs r

ec

ord

ed

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tly in

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uit

y

Ne

t ca

pita

l re

se

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sta

blis

he

d o

n m

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er

with

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vin

gs &

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an

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nio

n (

S.A

.)

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imite

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17

1,7

45

-

17

1,7

45

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blis

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ed

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ble

pre

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nce

sh

are

s a

nd

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ne

ral r

ese

rve

fo

r

cre

dit

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s u

po

n m

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er

-

4,5

71

-

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(4,5

86

)(1

5)

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nsfe

r to

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se

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29

16

5 -

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6

19

78

7

Clo

sin

g b

ala

nc

e a

t 3

0 J

un

e 2

01

04

89

8,1

93

(5,9

61

)2

93

1,4

42

17

1,7

45

17

5,8

79

35

2,0

80

Th

e S

tate

me

nts

of C

ha

ng

es in

Eq

uity

are

to

be

re

ad

in c

on

jun

ctio

n w

ith th

e a

cco

mp

an

yin

g n

ote

s to

th

e fin

an

cia

l sta

tem

en

ts.

16



STATEMENTS OF CASH FLOWS


Note

2011 2010 2011 2010

$'000 $'000 $'000 $'000

Cash from operating activities

Interest received 426,076 279,037 425,496 278,922

Interest paid (279,923) (190,709) (285,987) (183,129)

Fee and commission received 34,873 38,978 37,939 42,001

Other income received 30,328 12,188 28,609 10,925

Recoveries on loans and advances previously written off 629 849 629 849

New loans disbursed (790,072) (778,762) (790,072) (778,762)

Principal collected on loans 834,639 798,220 834,639 798,220

Net decrease in revolving credit loans (14,176) (512) (14,176) (512)

Cash payments to employees and suppliers (156,961) (106,810) (140,260) (109,666)

Income taxes paid (10,466) (1,332) (10,810) (1,747)Net cash from operating activities 39b 74,947 51,147 86,007 57,101

Cash from investing activities

Net decrease/(increase) in Available-for-Sale investment securities 391,685 (445,000) 391,685 (445,000)

Proceeds from sale of non-tradeable investments 5 - 5 -

Acquisition of property plant and equipment (13,865) (3,668) (13,865) (3,668)

Acquisition of non-tradeable investments (17,652) (13,850) (152) (650)

Proceeds from sale of property, plant and equipment 74 119 74 119

Net cash received on merger - 317,582 - 317,582

Dividends and distributions received 5,648 1,007 5,648 1,007

Net increase in Held-to-Maturity investment securities 20,000 86,250 20,000 86,250 Net cash used in investing activities 385,895 (57,560) 403,395 (44,360)

Cash from financing activities

Net increase in deposits and withdrawable share capital 68,192 44,854 68,088 44,854

New borrowings 844,954 777,292 504,084 777,292

Proceeds from residential backed securities issue - - 530,000 250,000

Repayment of borrowings (865,838) (667,805) (865,838) (794,486)

Payment to Noteholders - - (206,630) (136,519)

Subordinated debt repayment (5,000) (25,000) (5,000) (25,000)Net cash from financing activities 42,308 129,341 24,704 116,141

Net (decrease)/increase in cash and cash equivalents 503,150 122,928 514,106 128,882

Cash and cash equivalents at 1 July 366,718 243,790 378,818 249,936

Cash and cash equivalents at 30 June 39a 869,868 366,718 892,924 378,818

The Statements of Cash Flows are to be read in conjunction with the accompanying notes to the financial statements.


17


An

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1120

Notes to the Financial StatementsAUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)AND ITS CONTROLLED ENTITIESNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2011

1. SIGNIFICANT ACCOUNTING POLICIES

a) Reporting entity

b) Basis of preparation

Statement of compliance

Basis of measurement

•• Available-for-Sale financial assets are measured at fair value;• Land and buildings are measured at fair value; and• Loans are measured at amortised cost.

Functional and presentation currency

Use of estimates and judgements

•••• Note 42 - business combination

Australian Central Credit Union Ltd (the “Holding Entity”), (trading as People's Choice Credit Union) is a company domiciled inAustralia. The consolidated financial report of the Holding Entity for the financial year ended 30 June 2011 comprises the HoldingEntity and its controlled entities (together referred to as the “Consolidated Entity”).

The consolidated financial report is a general purpose financial report which has been prepared in accordance with AustralianAccounting Standards ("AASBs") adopted by the Australian Accounting Standards Board ("AASB") and the Corporations Act 2001.The consolidated financial report of the Group and of the Holding Entity comply with International Financial Reporting Standards("IFRSs") and interpretations adopted by the International Accounting Standards Board ("IASB").

The consolidated financial report has been prepared on the historical cost basis except for the following material assets and liabilitiesin the statement of financial position:

The Holding Entity is a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order,amounts in the financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

The consolidated financial report was authorised for issue by the Directors on 29 August 2011.

Derivative financial instruments are measured at fair value;

The financial report has been prepared on a going concern basis.

The financial report is presented in Australian dollars, which is the Holding Entity's functional currency.

The preparation of a financial report in conformity with IFRS requires management to make judgements, estimates and assumptionsthat affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimatesand associated assumptions are based on historical experience and various other factors that are believed to be reasonable whenmaking the judgement about carrying values of assets and liabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies thathave the most significant effect on the amount recognised in the financial statements are described in the following notes:

The merger with Savings & Loans Credit Union (S.A.) Limited was accounted for using the requirements applicable to mergersbetween mutual entities. All the identifiable assets and liabilities of Savings & Loans Credit Union (S.A.) Limited were required tobe initially recognised at their fair values on the date of merger. This involved critical accounting assumptions, judgements andestimates.

Note 17(a) - measurement of the recoverable amounts of cash-generating unitsNote 13 - provision for impairment of loans and advancesNote 41(i) - valuation of financial instruments

18

21

An

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11


Notes to the Financial StatementsAUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)


NOTES TO THE FINANCIAL STATEMENTS


1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

b) Basis of preparation (continued)

Issued standards early adopted

c) Basis of consolidation

(i) Controlled Entities

(ii) Transactions eliminated on consolidation

(iii) Special purpose entities

(iv) Business combinations

d) Cash and cash equivalents

Controlled Entities are entities controlled by the Holding Entity. Control exists when the Holding Entity has the power, directly orindirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,potential voting rights that presently are exercisable are taken into account. The controlled entities are fully consolidated from thedate on which control is transferred to the Holding Entity and they are de-consolidated from the date that control ceases.

In the financial statements, investments in controlled entities are carried at cost.

The Consolidated Entity has not early adopted any issued standards in the financial year.

The accounting policies set out below have been consistently applied by each entity in the Consolidated Entity.

All business combinations that occurred on or after 1 July 2009 are accounted for by applying the acquisition method. TheConsolidated Entity has applied the acquisition method for the business combination that occurred during the prior period asdisclosed in Note 42.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation andarises from a past event, and its fair value can be measured reliably.

Intragroup balances and transactions, and any unrealised income and expenses arising from intragroup transactions are eliminatedin preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only tothe extent that there is no evidence of impairment.

Transaction costs that the Consolidated Entity incurs in connection with a business combination, such as finder's fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bankoverdrafts that are repayable on demand and form an integral part of the Consolidated Entity's cash management are included as acomponent of cash and cash equivalents for the purpose of the statements of cash flows.

The acquirer, which is the combining entity that obtains control of the other combining entities or businesses, has been identified bymanagement. Control is the power to govern the financial and operating policies of an entity so as to obtain the benefits from itsactivities. The acquisition date is the date on which control is transferred to the acquirer.

The Group has established a number of special purpose entities ("SPEs") for the purpose of the issuance of Residential MortgageBacked Securities ("RMBS"). The SPEs have been consolidated as the Group is exposed to the majority of the residual risks andrewards of the SPEs. For the accounting policy on securitisation refer to Note 1(t).

19


An

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e) Trade and other receivables

f) Loans and advances

•

•

•

•

Provision for impairment

• Specific Provision

• Collective Provision

The quantitative effect is disclosed in Note 13.

Impairment losses are recognised in profit or loss.

Loans and advances, that meet significant delinquency and loan size criteria, are individually assessed for impairment to estimate thelikely loss on the loan.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the differencebetween the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit lossesthat have not yet been incurred).

Impairment of loans and advances is recognised when objective evidence is available that a loss event has occurred.

Loans and advances that do not meet significant delinquency criteria are not individually assessed but are placed into portfolios ofassets with similar risk profiles and a collective assessment of impairment is performed based on objective evidence from historicalexperience.

Impaired loans - are loans and advances where the full recovery of outstanding principal and interest is considered doubtful.

Assets acquired through the enforcement of security - are assets (usually residential property or motor vehicles) acquired in

full or partial settlement of an advance through the enforcement of security arrangements. The recoverable value of such assetsforms part of the net value of loans and advances as part of the estimated future cashflows.

Loans and advances comprise term and revolving credit facilities provided to members and members' overdrawn savings accounts.Loans and advances are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at theiramortised cost using the effective interest rate method, less impairment losses. The effective interest rate is the rate that exactlydiscounts estimated future cash payments through the expected life of the loan or advance to the carrying amount of the loan oradvance. When estimating the future cash flows, the Holding Entity considers all contractual terms of the loan or advance excludingany future credit losses. Included in this calculation are all fees paid or received that are integral to the contract.

Loans and advances are reviewed and graded according to the assessed level of credit risk. Classifications adopted are as follows:

Past-due loans - are loans and advances where the borrower has failed to make a repayment when contractually due.

Receivables comprising of non-interest bearing sundry debtors are stated at their cost less impairment losses (see Note 1(g)).

Restructured loans - arise when the borrower is granted concessional terms or conditions due to difficulties in meeting the

original contractual terms, and the revised terms are more favourable than comparable new facilities.

All loans are subject to a continuous management review process to assess whether there is any objective evidence that any loan orgroup of loans is impaired.

20

23

An

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f) Loans and advances (continued)

• General Reserve for Credit Losses

g) Impairment

(i) Reversals of impairment

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwillallocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group ofunits) on a pro rata basis.

When a decline in the fair value of an Available-for-Sale financial asset has been recognised in other comprehensive income, andpresented in the fair value reserve in Equity and there is objective evidence that the asset is impaired, the cumulative loss that hadbeen recognised in other comprehensive income is transferred to profit or loss even though the financial asset has not beenderecognised. The amount of the cumulative loss that is removed from other comprehensive income and recognised in profit or lossis the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previouslyrecognised in profit or loss.

For goodwill and other intangible assets that have an indefinite life, the recoverable amount is estimated annually.

For the accounting policy on impairment of loans and advances, refer to Note 1(f).

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing the value inuse, the estimated future cash flows are discounted to the present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independentcash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

An impairment loss in respect of a Held-to-Maturity or receivable carried at amortised cost is reversed if the subsequent increase inthe recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

The Australian Prudential Regulatory Authority (''APRA'') requires Authorised Deposit-Taking institutions to maintain a prescribedlevel of provision for regulatory purposes. The difference between the impairment provisions calculated under IFRS and thoserequired by APRA is represented by a General Reserve for Credit Losses within Equity. Transfers to and from the General Reservefor Credit Losses are made from retained earnings.

The carrying amount of the Consolidated Entity's assets, other than deferred tax assets (see Note 1(p)) and loans and advances (seeNote 1(f)), are reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists,the asset's recoverable amount is estimated (see Note 1(f)) for signs of objective evidence indicating that impairment may haveoccurred. Where objective evidence of impairment exists the asset's recoverable amount is determined.

An impairment loss in respect of an investment in an Equity instrument classified as Available-for-Sale is not reversed through profitor loss. If the fair value of a debt instrument classified as Available-for-Sale increases and the increase can be objectively related toan event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the reversalrecognised in profit or loss.

An impairment loss is recognised whenever the carrying amount of an asset (either in its own right or as part of a cash generatingunit) exceeds its recoverable amount. Impairment losses are recognised in profit or loss unless the asset has previously beenrevalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excessrecognised in profit or loss.

The recoverable amount is calculated as the present value of estimated future cash flows, discounted at the original effective interestrate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short term durationare not discounted.

21


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g) Impairment (continued)

(ii) Reversals of impairment (continued)

(iii) Derecognition of financial assets and liabilities

h) Financial Instruments - Non-derivative financial instruments

(i) Available-for-Sale investment securities

(ii) Held-to-Maturity investment securities

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cashequivalents, loans and borrowings, and trade and other payables.

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that wouldhave been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:a) the right to receive cash flows from the asset has expired, b) the Consolidated Entity retains the right to receive cash flows fromthe asset, but has assumed an obligation to pay them without material delay to a third party; or c) the Consolidated Entity hastransferred its rights to receive cash flows from the asset and either (i) has transferred substantially all the risks and rewards of theasset, or (ii) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of theasset.

An impairment loss in respect of goodwill is not reversed.

Held-to-Maturity investment securities are measured at amortised cost using the effective interest method.

Financial instruments classified as Held-to-Maturity are non-derivative financial assets that have determinable payments, fixedmaturity and there is an ability and intent by the Holding Entity to hold the financial instrument until maturity. If during the current orprevious two reporting periods the entity has derecognised or reclassified more than an insignificant amount of an asset class withinthis category then all of the assets within that class are reclassified as Available-for-Sale. When the financial instrument isderecognised any gain or loss on de-recognition is recognised directly in profit or loss. Where an asset is reclassified as beingAvailable-for-Sale it is re-measured at fair value and any difference between its carrying amount and the fair value is recognised inEquity.

The fair value of financial instruments classified as Available-for-Sale is estimated using discounted cash flow analysis, based oncurrent market rates for similar arrangements.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliablymeasured are carried at cost. Investments in controlled entities are carried at cost.

Financial instruments held by the Consolidated Entity classified as being Available-for-Sale are non-derivative financial assets andare stated at fair value, with any resultant gain or loss recognised in other comprehensive income and presented within Equity in thefair value reserve, except for impairment losses. Where the financial instruments are derecognised, the cumulative gain and losspreviously recognised in other comprehensive income, and presented in the fair value reserve in Equity, is transferred to profit orloss. Where these investments are interest-bearing, interest calculated using the Effective Interest Rate method is recognised inprofit or loss.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. When an existingfinancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability aresubstantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of anew liability. The difference in the respective carrying amounts is recognised in profit or loss.

Financial instruments classified as Available-for-Sale investment securities are recognised/derecognised by the Consolidated Entityon the date it commits to purchase/sell the investments.

Impairment losses, other than in respect of goodwill, are reversed when there is an indication that the impairment loss may no longerexist and there has been a change in the estimate used to determine the recoverable amount.

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h) Financial Instruments - Non-derivative financial instruments (continued)

(iii) Liabilities

(iv) OtherOther

i) Acquisition of assets

j) Property, plant and equipment

Owned assets

Land and buildings

Property, plant and equipment

Depreciation

Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairmentlosses.

All assets acquired, including property, plant and equipment and intangibles other than goodwill, are initially recorded at their cost ofacquisition at the date of acquisition, being their fair value of the consideration provided plus incidental costs directly attributable tothe acquisition.

Non-derivative financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent toinitial recognition these financial liabilities are measured at amortised cost using the effective interest rate method.

Plant and equipment of the Consolidated Entity are brought to account at cost, less any accumulated depreciation and impairmentlosses.

With the exception of freehold land, items of property, plant and equipment are depreciated on a straight line basis so as to write offthe net cost of each non-current asset over their expected useful lives. The depreciation rates used for each class of asset in thecurrent and comparative periods are as follows:

If the revaluation results in a net revaluation increment, the net increment is credited directly to an asset revaluation reserve, exceptthat, to the extent that the increment reverses a decrement previously recognised as an expense in the statement of comprehensiveincome, in which case it is recognised as revenue in the statement of comprehensive income. A net revaluation decrement isrecognised as an expense in the statement of comprehensive income, except that, to the extent that a credit balance exists in theasset revaluation reserve, the decrement is debited directly to the reserve.

Land and buildings are held at their fair value. Independent valuations of land and buildings are performed on a regular basis toensure the carrying amount of each asset is stated at its fair value at reporting date.

Where settlement of any part of cash consideration is deferred, the amounts payable are recorded at their present value, discountedat the rate applicable to the Consolidated Entity if a similar borrowing were obtained from an independent financier under comparableterms and conditions. The unwinding of the discount is treated as interest expense.

The costs of assets constructed or internally generated by the Consolidated Entity, other than goodwill, include the cost of materialsand direct labour. Directly attributable overheads and other incidental costs are also capitalised to the asset.

Expenditure, including that on internally generated assets other than research and development costs, is only recognised as an assetwhen the entity controls future economic benefits as a result of the costs incurred that are probable and can be measured reliably.Costs attributable to feasibility and alternative approach assessments are expensed as incurred.

The Holding Entity initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All otherfinancial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at whichthe Holding Entity becomes a party to the contractual provisions of the instrument. The Holding Entity derecognises a financial liabilitywhen its contractual obligations are discharged or cancelled or expire.

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j) Property, plant and equipment (continued)

Property, plant and equipment 2011 2010Leasehold improvements 10% to 67% 10% to 67%Information technology 7.5% to 40% 7.5% to 40%Office equipment 7.5% to 25% 7.5% to 25%Fixtures and fittings 7.5% to 25% 7.5% to 25%Motor vehicles 20% 20%

Land and buildings are not depreciated.

Leased assets

k) Intangible assets

(i) Goodwill

(ii) Acquired Contractual Rights

(iii) Software

(iv) Amortisation

Intangibles 2011 2010Computer Software 14% to 40% 14% to 40%Core Deposit Intangible 11% 11%Brand Name* - -Acquired Contractual Rights 20% 20%

* Brand Name intangible assets were fully amortised as at 30 June 2010.

Goodwill is stated at cost less any accumulated amortisation and accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (refer Note 17 a).

The amount relating to acquired contractual rights to future cashflows is measured at cost less accumulated amortisation andaccumulated impairment losses. Acquired Contractual Rights are amortised to profit or loss over the expected useful life of the asset.The amortisation rates for intangible assets for the current and comparative periods are outlined in the table at k (iv).

Software assets that are not integral to the operation of hardware are recognised as intangible assets with a finite life. Where theexpenditure is of a significant amount and there are related benefits which are expected to be realised over the medium to long term,it is deferred and amortised on a straight line basis over the period in which the benefits are expected to be realised. The amortisationrates for the current and comparative periods are outlined in the table at k (iv).

Negative goodwill arising on acquisition is recognised directly in profit or loss.

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

Items of intangible assets are amortised on a straight line basis so as to write off the net cost of each non-current asset over theirexpected useful lives. The amortisation rates used for each class of intangible asset in the current and comparative periods are asfollows:

Leases of plant and equipment under which the Consolidated Entity assumes substantially all the risks and benefits of ownership areclassified as finance leases. Other leases are classified as operating leases and not recognised in the Consolidated Entity'sstatement of financial position. The Consolidated Entity is not currently engaged in any finance leases.

The expected useful life and the depreciation method applied to an asset are reassessed at least annually.

Payments made under operating leases are expensed over the term of the lease.

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k) Intangible assets (continued)

(v) Brand Name

(vi) Core Deposit Intangible

(vii) Financial Planning and General Insurance Contractual Relationships

l) Employee entitlements

Wages, salaries and annual leave

Long service leave

Banked hours

Sick leave

Defined contribution plans

The provision for employee benefits for long service leave represents the present value of the estimated future cash outflows to bemade resulting from employees' service provided to reporting date. The provision is calculated using expected future increases inwage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted usingthe rates attaching to Commonwealth Government bonds at the reporting date which most closely match the terms of maturity of therelated liabilities.

The provision for employee benefits for wages, salaries and annual leave represents the amount which the Consolidated Entity has apresent obligation to pay resulting from employees' services up to balance date. The provision has been calculated at undiscountedamounts based on remuneration wage and salary rates that the Consolidated Entity expects to pay as at reporting date includingrelated on costs, such as workers compensation insurance and payroll tax.

Assets reflecting the value of the financial planning and general insurance relationships were recognised following the merger withSavings & Loans Credit Union (S.A.) Limited and represent a value attributable to future revenue generation from these relationships.The financial planning contracts are amortised over three years and the general insurance contracts are amortised over four years ona straight line basis.

The core deposit intangible is amortised over a period of nine years and is stated at cost less accumulated amortisation andaccumulated impairment losses. The amortisation period is based on the underlying expected life of the deposit portfolio. The coredeposit intangible is assessed for any indication of impairment at each reporting date.

Brand intangible assets were recognised on merger. Brand intangible assets represent the value attributed to the brand namesassociated with businesses acquired through merger. The useful life of the brands recognised is estimated to be finite as the mergedentity is implementing a new brand, with the brand acquired upon the merger of Savings & Loans Credit Union (S.A.) Limited beingfully amortised as at 30 June 2010.

All employees, upon satisfying eligibility tests, may participate in an accumulation superannuation scheme. The Holding Entity'scontributions to defined contribution plans are recognised as an expense in profit or loss as incurred. The Holding Entity has no legalobligation to cover any shortfall in the fund's obligation to provide benefits to employees on retirement.

Sick leave entitlements of employees of the Consolidated Entity are non-vesting. No provision has been raised for unusedentitlements to non-vesting sick leave as it is not probable that sick leave to be taken in the future will exceed entitlements to beaccrued in the future.

The provision for banked hours represents the amount, measured at current rates, that the Consolidated Entity expects to pay as atreporting date. Banked hours, are a form of flexible working arrangements for non-packaged staff that provides many of theadvantages of traditional flexi-time and rostered days off with the added advantage of being able to be tailored to both the individuals'and organisational requirements. Staff are able to draw down on their entitlements during the year to meet their personal needs whilstensuring operational requirements are satisfied or in certain circumstances convert provisions to normal remuneration paymentsduring the year.

A core deposit intangible was recognised following the merger with Savings & Loans Credit Union (S.A.) Limited and represents thevalue of having a deposit base from customer and business transaction accounts, savings accounts and term deposits, providing amore favourable source of funding than alternative sources of funding such as in wholesale and securitisation markets.

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m) Interest-bearing borrowings

n) Trade and other payables

o) Revenue recognition

(i) Loan interest

(ii) Revenue from services rendered

(iii) Dividends

(iv) Commissions

(v) Other non-interest income

p) Income tax

Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extentthat it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at thereporting date. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the costsincurred or to be incurred cannot be measured reliably.

Dividends from other investments are recognised when the right to receive the dividend has been established.

Interest-bearing borrowings (inclusive of member deposits) are recognised initially at fair value less attributable transaction costs.Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost andredemption value being recognised in profit or loss over the period of the borrowings on an effective interest rate basis.

Interest on loans and advances is recognised on an amortised cost basis using the Effective Interest Rate method. The effectiveinterest rate is the rate that exactly discounts estimated future cash payments through the expected life of the loan or advance to thenet carrying amount of the loan or advance. When estimating the future cash flows the Holding Entity considers all contractual termsof the loan or advance excluding any future credit losses. Included in this calculation are all fees and points paid or received that areintegral to the contract (refer Note 1(f)). All interest is recognised on an accruals basis.

Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing and are normally settled onthirty day terms.

Revenue is recognised on an accrual basis upon the provision of services from acting in the capacity of an agent rather than as theprincipal in a transaction.

Mutual Aid income is recognised over the average life of the associated loans.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for the financialreporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expectedmanner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted atthe reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which theasset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will beutilised.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at thereporting date, and any adjustment to tax payable in respect of previous years.

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p) Income tax (continued)

Tax consolidation

q) Deferred borrowing costs

r) Financial instruments - Derivative Financial instruments

(i) Hedging

Cash flow hedges

Further details of derivative financial instruments are disclosed in Note 41.

The fair value of interest rate swaps is the present value of the future cash flows that the Consolidated Entity would receive or pay toterminate the swap at the balance date, taking into account current interest rates and the current creditworthiness of the swapcounterparties.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of thetax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using theseparate taxpayer within group approach by reference to the carrying amounts in the separate financial statements of each entity andthe tax values applying under tax consolidation.

Deferred borrowing costs include costs associated with the establishment of a number of separate securitisation facilities. Thesecosts are amortised over the expected life of the facilities.

The Consolidated Entity uses interest rate swaps to hedge its exposure to interest rate risks arising from operational and financingactivities. In accordance with its treasury policy, the Consolidated Entity does not hold or issue derivative financial instruments fortrading purposes. However derivatives that do not qualify for hedge accounting are accounted for at fair value through profit and loss.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments arestated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, wherederivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged(refer Note 1(r)(i)).

On entering into a hedging relationship, the Consolidated Entity formally designates and documents the hedge relationship and therisk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedginginstrument, the hedged item or transaction, the nature of risk being hedged and how the entity will assess the hedging instrument'seffectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. Suchhedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoingbasis to determine that they actually have been highly effective throughout the financial reporting period as designated.

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or ahighly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directlyin other comprehensive income. When the forecast transaction subsequently results in the recognition of a non-financial asset ornon-financial liability, or the forecast transaction for a non-financial asset or non-financial liability the associated cumulative gain orloss is removed from other comprehensive income and included in the initial cost or other carrying amount of the non-financial assetor liability. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, then theassociated gains and losses that were recognised directly in other comprehensive income are reclassified into profit in the sameperiod or periods during which the asset acquired or liability assumed affects the Statement of Comprehensive Income (i.e. when theinterest income is recognised).

The Holding Entity and its Australian wholly-owned controlled entities formed a tax-consolidated group with effect from 1 July 2003and are therefore taxed as a single entity from that date. The head entity within the consolidated group is Australian Central CreditUnion Ltd., trading as People's Choice Credit Union.

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(i) Hedging (continued)

Cash flow hedges (continued)

s) Goods and services tax

t) Securitisation

u) New Standards and interpretations not yet adopted

•

•

v) Comparatives

Where appropriate, amounts shown for prior periods have been reclassified to facilitate comparison.

AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets resulting fromthe first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and Measurement . AASB 9 willbecome mandatory for the Holding Entity's 30 June 2014 financial statements. Retrospective application is generally required,although there are exceptions, particularly if the entity adopts the standard for the year ended 30 June 2012 or earlier. TheHolding Entity has not yet determined the potential effect of the standard.

AASB 124 Related Party Disclosures (revised December 2009) simplifies and clarifies the intended meaning of the definition ofa related party and includes an explicit requirement to disclose commitments involving related parties. The amendments willbecome mandatory for the Holding Entity's 30 June 2012 financial statements.

The Holding Entity through its loan securitisation program, securitises mortgage loans to SPEs, which in turn issue rated securities toinvestors. Fees are received for various services provided to the SPEs on an arms-length basis, including servicing fees andmanagement fees and are reported in profit or loss. The Holding Entity also provides arms-length interest rate swaps and loanfacilities to the SPEs.

Effectiveness tests are performed on all derivative financial instruments to determine if they are still providing the protection originallyintended when entered into by the Consolidated Entity. Where a derivative financial instrument that was previously considered to beeffective no longer satisfies the effectiveness test criteria any gain or loss on the instrument previously recognised in othercomprehensive income is reversed through profit or loss with all subsequent gains or losses recognised through profit or loss.

When a derivative financial instrument is not designated in a qualifying hedge relationship, all changes to its fair value are recogniseddirectly in profit or loss.

Revenues, expenses and assets are recognised net of the amount of goods and services tax ("GST"), except where the amount ofGST incurred is not recoverable from the Australian Taxation Office ("ATO"). In these circumstances the GST is recognised as partof the cost of acquisition of the asset or as part of an item of the expense.

The following standards, amendments to standards and interpretations have been identified as those which may impact theConsolidated Entity in the period of initial application. They are available for early adoption at 30 June 2011, but have not beenapplied in preparing this financial report:

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investingand financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

Details of the transfer of financial assets to third parties and/or special purpose entities are disclosed in Note 35.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, theATO is included as a current asset or liability in the Statement of Financial Position.

Costs incurred in the establishment of a securitisation issue are amortised over the expected life of the issue.

The 2011 financial year's disclosures are the first full financial year of the merged entity's operations. The 2010 comparative financialyear comprises a full 12 month result of Australian Central Credit Union Limited and 7 months contribution from Savings & LoansCredit Union (S.A.) Limited (being from the date of the merger , 1 December 2009 to 30 June 2010). The current year performancehas been disclosed below with a comparison to the prior year, however these need to be considered in the context of the mergerimpacts in the prior year as outlined in the Directors' Report.

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2. INTEREST REVENUE AND INTEREST EXPENSE

Average Average

Interest Interest

Interest Rate Interest Rate

$'000 % $'000 %

Interest Income 2011

Cash and cash equivalents 6,820 1.99% 7,818 1.69%

Loans and advances 372,511 7.54% 372,547 7.54%

Investments

Available-for-Sale investment securities 41,633 5.61% 41,633 5.61%

Held-to-Maturity investment securities - - - -

Other investments 1,614 3.90% - -

422,578 7.08% 421,998 7.06%

Interest Expense 2011

Payables due to other financial institutions - - - -

Deposits 181,179 4.67% 181,173 4.67%

Borrowings 88,685 6.11% 59,019 6.11%

Interest Rate Hedges 14,313 - 6,591 -

Notes Payable - - 34,720 5.79%

Subordinated debt 38 9.51% 38 9.51%

284,215 4.95% 281,541 4.94%

Net Interest Income 2011 138,363 2.12% 140,457 2.13%

Interest Income 2010

Cash and cash equivalents 5,970 0.83% 6,528 0.66%

Loans and advances 267,711 6.56% 267,061 7.29%

Available-for-Sale investment securities 8,591 5.34% 8,783 5.39%

Held-to-Maturity investment securities 16,965 5.34% 16,774 5.39%

299,237 6.39% 299,146 7.02%

Interest Expense 2010

Payables due to other financial institutions 1,971 4.73% 1,971 4.73%

Deposits 106,920 3.83% 106,917 3.83%

Borrowings 71,086 3.62% 45,231 5.76%

Interest Rate Hedges 16,927 - 22,898 -

Notes Payable - - 18,415 4.62%

Subordinated debt 926 6.44% 926 6.44%

197,830 4.20% 196,358 4.86%

Net Interest Income 2010 101,407 2.19% 102,788 2.17%


The following tables show the interest of each of the major categories of interest-bearing assets and liabilities, the amount of interest

revenue or expense and the average interest rate.

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AUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union)AND ITS CONTROLLED ENTITIESNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2011

2011 2010 2011 2010$'000 $'000 $'000 $'000

3. NET INTEREST INCOME

Interest income Cash and short term funds 6,820 5,969 7,818 6,528 Investment securities 41,633 25,557 41,633 25,557 Loans and advances 374,125 267,711 372,547 267,061 Total interest income 422,578 299,237 421,998 299,146Interest expense Banks and customers 225,424 134,429 215,245 125,332 Debt securities issue 38 926 38 926

13,452 22,898 13,452 22,898

861 (5,971) (6,861) - Other borrowed funds 43,453 44,973 58,613 46,597 Other 987 575 1,054 605 Total interest expense 284,215 197,830 281,541 196,358

4. NON-INTEREST INCOME

Fee and commission income Loan fee income 3,007 2,210 3,007 2,210 Transactional fee income 12,878 10,966 12,878 10,966 Insurance fees and commissions 12,375 9,656 12,375 9,656 Financial planning fees and commissions 6,996 5,780 9,965 8,845 Other commissions 6,355 4,910 6,355 4,910 Superannuation income 371 228 371 228 Other fees 16,543 12,868 14,824 11,650 Total fee and commission income 58,525 46,618 59,775 48,465Bad debts recovered 629 849 629 849 Dividends received 5,648 1,007 5,648 1,007 Profit on sale of property, plant and equipment 16 25 16 25 Property rental income 97 55 97 55

- 4,633 - 4,633 Mutual Aid Income 6,961 3,637 6,961 3,637 Total non-interest income 71,876 56,824 73,126 58,671

5. IMPAIRMENT LOSSES ON LOANS AND ADVANCES

Bad debts written off to profit or loss 2,290 2,069 2,290 2,069 Increase in provision for impairment 558 421 558 421 Total impairment on loans and advances 2,848 2,490 2,848 2,490

6. OTHER EXPENSES

Staff costs (Note 7) 75,763 52,783 76,913 53,878 Provision for impairment on other investments (328) - (328) - Administrative expenses 19,798 13,009 20,413 13,491 Merger expenses (Note 42) - 5,003 - 5,003 Depreciation:

Property, plant and equipment 8,761 7,470 8,899 7,636 Amortisation:

Computer software 149 102 178 138 Intangible Assets - computer software 1,791 612 1,791 612

- acquired contractual rights 3,052 7,566 3,052 7,566 - core deposit intangible 2,398 667 2,398 667

Marketing costs 9,491 6,017 9,491 6,017 Operating lease:

Rentals 11,592 9,226 11,784 9,412 Other occupancy expenses 4,454 3,209 4,542 3,294

Distribution channel costs 15,752 11,177 15,752 11,177 Information technology costs 10,977 7,575 10,977 7,575 Loss on disposal of property, plant and equipment - 297 - 297

163,650 124,713 165,862 126,763

Consolidated Credit Union

through profit or loss

Net change in fair value of cash flow hedges transferred from equity

Net change in fair value of financial assets/liabilities at fair value

Net change in fair value of financial assets/liabilities at fair value

through profit or loss

30

Notes to the Financial Statements

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

7. STAFF COSTS

Wages and salaries 63,950 46,004 64,922 46,962

Employee on costs 3,695 2,704 3,747 2,758

Superannuation contributions 5,784 4,150 5,868 4,232

Increase/(decrease) in liability for annual leave 1,640 (250) 1,661 (249)

Increase in liability for long service leave 513 179 534 179

Increase/(decrease) in liability for banked leave 181 (4) 181 (4)75,763 52,783 76,913 53,878

8. INCOME TAX EXPENSE

(a) Income tax expense

Current tax 10,872 9,236 11,228 9,590

Deferred tax 532 (449) 517 (450)

Under provided in prior years 89 83 89 83 11,493 8,870 11,834 9,223

Deferred income tax/(revenue) expense

included in income tax expense comprises:

Decrease in deferred tax assets (Note 16) 3,829 985 2,337 984

Decrease in deferred tax liabilities (Note 26) (3,297) (1,434) (1,820) (1,434)532 (449) 517 (450)

(b) Numerical reconciliation of income

tax expense to prima facie tax

payable

Profit before tax 43,741 31,028 44,873 32,206

Tax at the tax rate of 30% (2010: 30%) 13,122 9,309 13,462 9,662

calculating taxable income:

Fully franked dividends received (1,694) (302) (1,694) (302)

Sundry items (24) (220) (23) (220)

11,404 8,787 11,745 9,140

Under/(over) provision in prior years 89 83 89 83

Income tax expense 11,493 8,870 11,834 9,223

(c) Amounts recognised directly in Equity

1,186 11,952 1,186 11,949 1,186 11,952 1,186 11,949

(d) Income tax recognised in other comprehensive income

Before Tax

Cash flow hedges 4,893 13,052 4,893 13,052

Revaluation of property, plant and equipment - 175 - 175 4,893 13,227 4,893 13,227

Tax (expense)/benefit

Cash flow hedges 1,468 3,915 1,468 3,915


Net of tax

Cash flow hedges 3,425 9,137 3,425 9,137



Tax effect of amounts which are not deductible/(taxable) in

Aggregate deferred tax arising in the reporting period and not recognised in

net profit or loss but directly debited or credited to Equity:

Net deferred tax debited/(credited) directly to Equity (Notes 16 and 26)

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Notes to the Financial Statements





9. FRANKING ACCOUNT

2011 2010 2011 2010

$'000 $'000 $'000 $'000

10. CASH AND CASH EQUIVALENTS

Cash on hand and at bank 15,784 12,706 28,591 19,556

Deposits at call 121,550 9,650 121,550 9,650

Deposits with Cuscal Ltd 12,634 15,776 12,634 15,776 149,968 38,132 162,775 44,982

11. TRADE AND OTHER RECEIVABLES

Other receivables 14,112 18,021 14,360 18,284

Allowance for impairment - (351) - (351)

14,112 17,670 14,360 17,933

Interest receivable 7,644 10,453 7,666 10,475

Amounts receivable from controlled entities 15 1,737 - -

21,771 29,860 22,026 28,408

Maturity analysis

Not longer than 3 months 21,721 28,048 21,739 28,201

No maturity specified 50 1,812 287 207 21,771 29,860 22,026 28,408

12. LOANS AND ADVANCES

Credit card outstandings 62,622 56,458 62,622 56,458

Revolving credit facilities 471,581 485,757 471,581 485,757

Term loans 4,420,971 4,447,671 4,420,971 4,447,671 Gross Loans and advances 4,955,174 4,989,886 4,955,174 4,989,886

Provision for impairment (Note 13) (4,677) (4,119) (4,677) (4,119)

Loan origination and processing costs 684 932 684 932

Unearned loan fees (5,187) (6,776) (5,187) (6,776)Net loans and advances 4,945,994 4,979,923 4,945,994 4,979,923

(a) Maturity analysis: Scheduled for repayment:

Overdrafts and line of credit facilities 534,203 542,215 534,203 542,215

Not longer than 3 months 5,145 4,927 5,145 4,927

Longer than 3 and not longer than 12 months 7,057 6,426 7,057 6,426

Longer than 1 and not longer than 5 years 334,911 337,249 334,911 337,249

Longer than 5 years 4,073,858 4,099,069 4,073,858 4,099,069 4,955,174 4,989,886 4,955,174 4,989,886

(b) Loans by security

Secured by mortgage 4,354,598 4,376,798 4,354,598 4,376,798

Secured other 467,483 465,116 467,483 465,116

Unsecured 133,093 147,972 133,093 147,972 4,955,174 4,989,886 4,955,174 4,989,886


The ability to use these franking credits is restricted by the Constitution of the Holding Entity which does not currently permit dividend

payments. The balance of the franking account is adjusted for franking credits that the Holding Entity is currently prevented from distributing

in the subsequent financial year.

The Consolidated Entity has generated franking credits through paying income tax with a total of $71,684,775 (@ 30%) (2010: $57,608,233

(@ 30%)) worth of franking credits having been accumulated. This includes credits which will arise from the payment of income tax provided

for in the financial statements.

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

12. LOANS AND ADVANCES (continued)

(c) Loans by purpose

Residential loans 3,637,321 3,801,492 3,637,321 3,801,492

Personal loans 557,258 590,257 557,258 590,257

Residential investment loans 720,035 558,663 720,035 558,663

Commercial 40,560 39,474 40,560 39,474 4,955,174 4,989,886 4,955,174 4,989,886

(d) Aggregate amounts receivable from related parties

Key management personnel 4,029 3,973 4,029 3,973 4,029 3,973 4,029 3,973

13. IMPAIRMENT OF LOANS AND ADVANCES

(a) Provision for impairment

Total provisions:

Balance at beginning of year 4,119 1,079 4,119 1,079

Additions upon merger - 2,619 - 2,619

Increase/(decrease) in provision for loan impairment 558 421 558 421 Balance at end of year 4,677 4,119 4,677 4,119

Specific provision for impairment:

Balance at beginning of year 850 328 850 328

Additions upon merger - 395 - 395

Increase/(decrease) in provision 1,629 127 1,629 127 Balance at end of year 2,479 850 2,479 850

Collective provision for impairment:

Balance at beginning of year 3,269 751 3,269 751


Increase/(decrease) in provision (1,071) 294 (1,071) 294 Balance at end of year 2,198 3,269 2,198 3,269

Charge to profit or loss comprises:

Provision for loan impairment (Note 5) 558 421 558 421

Loans written off during the year as uncollectible (Note 5) 2,290 2,069 2,290 2,069 Total charge to profit or loss 2,848 2,490 2,848 2,490

(b) Impaired loans

Gross impaired loans 2,857 3,766 2,857 3,766

Specific provision for impairment (2,479) (2,529) (2,479) (2,529) Net impaired loans 378 1,237 378 1,237

(c) Restructured loans 8,259 6,957 8,259 6,957

(d) Assets acquired through the enforcement of security

Real estate assets acquired through enforcement of security:

Value of real estate assets acquired 964 610 964 610

Other assets acquired through enforcement of security: Value of other assets acquired 14 50 14 50

978 660 978 660 Total assets acquired through the enforcement of security


Details of loans to Directors and key management personnel are set out in

Note 40 (d).

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

14. INVESTMENTS

a) Available-for-Sale investment securities

(i) At the beginning of year 817,368 50,000 822,627 50,000 Additions/disposals (sale and redemption) 15,036 415,536 20,036 420,786 Additions upon merger - 350,399 - 350,399 Fair value adjustments (505) 1,433 (514) 1,442 At end of year 831,899 817,368 842,149 822,627

(ii) Classification:

Interest-bearing deposits 453,899 577,368 464,149 582,627 Negotiable certificates of deposit 378,000 240,000 378,000 240,000

831,899 817,368 842,149 822,627

b) Held-to-Maturity investment securities

(i) At the beginning of year 35,850 288,500 35,850 292,500

Additions/(maturities) (35,850) (252,650) (35,850) (256,650) At end of year - 35,850 - 35,850

(ii) Classification:

Interest-bearing deposits - 15,850 - 15,850

Negotiable certificates of deposit - 20,000 - 20,000 - 35,850 - 35,850

Maturity of investments:

Not longer than 3 months - 15,850 - 15,850

Longer than 3 and not longer than 12 months - 20,000 - 20,000 - 35,850 - 35,850

c) Other investments

Shares in unlisted entities (at cost) 12,580 5,882 12,580 5,883

Capital notes 30,700 13,200 - -

Allowance for impairment - (30) - (30)

43,280 19,052 12,580 5,853


Other investments 502 500 502 500 43,782 26,104 13,082 12,905

Shares in controlled entities (Note 38) 5,148 5,148 - - 48,930 31,252 13,082 12,905

Maturity of investments:

No fixed maturity 48,930 31,252 13,082 12,905 48,930 31,252 13,082 12,905

Total Investments 880,829 884,470 855,231 871,382

15. PROPERTY, PLANT AND EQUIPMENT

Land and buildings - at fair value 13,325 - 13,325 -


Fair value adjustments - 175 - 175 13,325 13,325 13,325 13,325

Leasehold improvements - at cost 23,199 15,351 23,207 15,358


Accumulated depreciation (14,096) (10,540) (14,103) (10,545)9,103 10,699 9,104 10,701


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2011 2010 2011 2010

$'000 $'000 $'000 $'000

15. PROPERTY, PLANT AND EQUIPMENT (continued)

Information Technology - at cost 24,222 19,007 24,462 19,247



Plant and equipment - at cost 10,668 7,699 11,409 8,440



Computer software - at cost 1,982 1,712 2,158 1,887

Accumulated depreciation (1,496) (1,348) (1,672) (1,494)486 364 486 393

Total property, plant and equipment - at cost or fair value 73,396 43,769 74,561 44,932


Total accumulated depreciation (41,171) (32,656) (42,334) (33,650)

Fair value adjustments - 175 - 175 32,225 36,336 32,227 36,505

Reconciliations

Buildings

Carrying amount at beginning of year 13,325 - 13,325 -


Fair value adjustments - 175 - 175 Carrying amount at end of year 13,325 13,325 13,325 13,325

Leasehold improvements

Carrying amount at beginning of year 10,699 7,781 10,701 7,785

Additions 1,689 60 1,689 60


Work in progress 552 306 552 306

Disposals - (60) - (60)

Depreciation (3,837) (3,276) (3,838) (3,278) Carrying amount at end of year 9,103 10,699 9,104 10,701

Information Technology


Additions 1,363 1,338 1,363 1,338



Transfers (458) - (458) -

Disposals - (48) - (48)

Depreciation (3,874) (3,250) (3,890) (3,269) Carrying amount at end of year 5,769 7,872 5,769 7,888

Plant and equipment


Additions 434 505 434 505



Disposals (57) (306) (57) (306)

Depreciation (1,050) (944) (1,171) (1,083) Carrying amount at end of year 3,542 4,076 3,543 4,198

Reconciliations of the carrying amounts for each class of property, plant

and equipment are set out below:


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2011 2010 2011 2010

$'000 $'000 $'000 $'000

15. PROPERTY, PLANT AND EQUIPMENT (continued)

Computer software

Carrying amount at beginning of year 364 189 393 253

Additions 155 277 155 277

Work in progress 116 - 116 -

Amortisation (149) (102) (178) (137) Carrying amount at end of year 486 364 486 393

16. DEFERRED TAX ASSETS

The balance comprises temporary

differences attributable to:

Amounts recognised in profit or loss

Loans and advances impairment 1,402 1,236 1,402 1,236

Accrued superannuation 163 85 166 85

Unearned income on term loans 793 2,033 793 2,033

Unearned fee income 3,066 2,206 3,066 2,206

Depreciation 2,008 1,695 2,010 1,698

Provisions 4,238 3,872 4,272 3,894

Financial liabilities at fair value through profit or loss 3,098 6,634 2,141 4,200

Intangible assets 284 1,010 284 1,010

Other items 266 376 267 376

15,318 19,147 14,401 16,738

Amounts recognised directly in Equity

Cash flow hedges 1,121 2,587 1,121 2,587 Net deferred tax assets 16,439 21,734 15,522 19,325

Movements:

Opening Balance 21,734 11,910 19,325 10,845


Credited/(charged) to the profit or loss (Note 8) (3,829) 985 (2,337) 984

(Charged)/credited to Equity (1,466) (3,811) (1,466) (5,154) Closing balance 16,439 21,734 15,522 19,325

10,663 13,264 10,678 13,288

Deferred tax assets to be recovered within 12 months 5,776 8,470 4,844 6,037 16,439 21,734 15,522 19,325

17. INTANGIBLE ASSETS

Goodwill - at cost 202 202 9,174 9,174

Accumulated impairment (60) (60) (697) (697)142 142 8,477 8,477

Computer software - at cost 26,304 17,295 26,304 17,295

Accumulated amortisation (17,502) (15,711) (17,502) (15,711)8,802 1,584 8,802 1,584

Core deposit intangible - at fair value 6,884 6,884 6,884 6,884

Accumulated amortisation (3,065) (667) (3,065) (667)3,819 6,217 3,819 6,217

The Holding Entity's properties were independently valued as at 31 May

2010 by Mr A Harry, AAPI MRICS, Certified Practising Valuer B.Bus.Prop

of Colliers International Consultancy and Valuation Pty Limited in

accordance with the Holding Entity's policy of obtaining independent

valuations. These independent valuations were performed on the basis of

the fair value of the properties in their existing use.


Deferred tax assets to be recovered after more than 12 months

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

17. INTANGIBLE ASSETS (continued)

Brand names - at fair value 5,215 5,215 5,215 5,215

Accumulated amortisation (5,215) (5,215) (5,215) (5,215)- - - -

Acquired contractual rights - at cost 9,177 1,366 9,177 1,366

- additions upon merger - 7,811 - 7,811

Accumulated amortisation (5,683) (2,631) (5,683) (2,631)3,494 6,546 3,494 6,546

Total intangible assets - at cost or fair value 47,782 30,962 56,754 39,934

Total additions upon merger - 7,811 - 7,811

Total accumulated impairment and amortisation (31,525) (24,284) (32,162) (24,921)16,257 14,489 24,592 22,824

Reconciliations

Goodwill

Carrying amount at beginning of year 142 142 8,477 8,477

Impairment charge - - - - Carrying amount at end of year 142 142 8,477 8,477

Computer software


Additions less opening work in progress 8,522 (56) 8,522 (56)


Transfers 458 - 458 -

Amortisation (1,791) (612) (1,791) (612) Carrying amount at end of year 8,802 1,584 8,802 1,584

Core deposit intangible

Carrying amount at beginning of year 6,217 - 6,217 -


Amortisation (2,398) (667) (2,398) (667) Carrying amount at end of year 3,819 6,217 3,819 6,217

Brand Name

Carrying amount at beginning of year - - - -


Amortisation - (5,215) - (5,215) Carrying amount at end of year - - - -

Acquired contractual rights



Amortisation (3,052) (2,351) (3,052) (2,351) Carrying amount at end of year 3,494 6,546 3,494 6,546

(a) Impairment tests for goodwill

A segment level summary of the goodwill allocation is presented below:

2011 2010

$'000 $'000

Financial Planning 8,477 8,477

Goodwill is allocated to the Consolidated Entity's cash generating units (CGUs) identified according to business segment and region of

operation.

Consolidated


Reconciliations of the carrying amounts for each class of intangible assets

are set out below:

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17. INTANGIBLE ASSETS (continued)

(a) Impairment tests for goodwill (continued)

2011 2010 2011 2010

$'000 $'000 $'000 $'000

18. OTHER FINANCIAL ASSETS

Interest rate swaps used for hedging 114 107 114 107

Financial assets at fair value through profit or loss 3,188 8,113 210 - 3,302 8,220 324 107

19. OTHER ASSETS

Deferred borrowing costs 4,662 2,893 4,662 2,893

Accumulated amortisation (1,628) (980) (1,628) (980)

Prepayments 2,018 649 2,053 701 5,052 2,562 5,087 2,614

20. DEPOSITS

Members' deposits 4,002,557 3,934,361 4,002,131 3,934,039

685 689 685 689 4,003,242 3,935,050 4,002,816 3,934,728

(a) Maturity analysis:

At call 1,890,693 1,813,489 1,890,267 1,813,167

Not longer than 3 months 1,105,786 1,244,892 1,105,786 1,244,892

Longer than 3 and not longer than 12 months 892,362 803,832 892,362 803,832

Longer than 1 and not longer than 5 years 114,233 72,775 114,233 72,775

Longer than 5 years 168 62 168 62 4,003,242 3,935,050 4,002,816 3,934,728

Withdrawable shares are included as part of at call deposits.

21. OTHER FINANCIAL LIABILITIES

Interest rate swaps used for hedging 10,875 22,622 8,287 22,622

Financial liabilities at fair value through profit or loss 2,798 - 2,798 - 13,673 22,622 11,085 22,622

• Cash flows were projected using the budgeted operating results for the next financial year as a base level, with cash flows extrapolated over

a further three years using a revenue growth rate of 2.0% (based on the budgeted revenue growth rate) and an overhead growth rate of 3%

(based on the budgeted average CPI increase) and a final terminal value calculation with no further growth rate applied.


• A discount rate of 15.663% was applied in determining the recoverable amounts for the CGUs. These discount rates were estimated based

on the weighted average cost of debt and capital allocated by the Consolidated Entity to these CGUs, reflecting the market assessment of

any risks specific to a financial planning business.

Withdrawable shares (issued and paid up shares at $2.00 per share)

The recoverable amount of a CGU is determined on either a fair value less costs to sell or a "Value in Use" methodology. The net present

value (NPV) of the relevant CGU's anticipated cashflows is used as a basis for determining whether any impairment exists.

• Management has undertaken sensitivity analysis and believes that no reasonably possible change in any of the above key assumptions

would cause the carrying value of the CGUs to exceed their recoverable amount.

The recoverable amount has been calculated in accordance with Note 1 (g) and no impairment has been identified.

Acquired contractual rights includes the value of financial planning and general insurance relationships recognised following the merger with

Savings & Loans Credit Union (S.A.) Limited and represents a value attributable to future revenue generation from these relationships.

Key assumptions used in value in use calculations:

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

22. TRADE AND OTHER PAYABLES

Accounts payable 40,715 56,641 65,013 60,361

Loan from SPE's 704,100 363,230 - -

Accrued interest payable 37,375 32,823 36,073 32,537

Amounts payable to controlled entities 88 - - - 782,278 452,694 101,086 92,898

23. BORROWINGS

The Consolidated Entity has access to the following funding facilities:

Wholesale funding facilities

National Australia Bank Ltd 200,000 250,000 200,000 250,000

Westpac Banking Corporation Ltd 400,000 640,000 400,000 640,000

Waratah Finance Pty Ltd 400,000 400,000 400,000 400,000

Credit Union Services Corporation (Australia) Ltd - 50,000 - 50,000

Other 1,900 2,276 1,900 2,276 1,001,900 1,342,276 1,001,900 1,342,276

Wholesale funding facilities utilised





Other 1,900 2,276 1,900 2,276 861,211 1,222,965 861,211 1,222,965

Wholesale funding facilities unutilised


Westpac Banking Corporation Ltd 35,000 - 35,000 -


Credit Union Services Corporation (Australia) Ltd - - - -

Other - - - - 140,689 119,311 140,689 119,311

Wholesale funding facilities maturity analysis

Longer than 3 and not longer than 12 months 1,000,000 1,340,000 1,000,000 1,340,000

Longer than 1 and not longer than 5 years 1,900 2,276 1,900 2,276 1,001,900 1,342,276 1,001,900 1,342,276

2011 2010 2011 2010

$'000 $'000 $'000 $'000

24. NOTES PAYABLE

SPE Noteholders - - 673,400 350,030

Consolidated

Credit Union

Wholesale funding (National Australia Bank Ltd, Westpac Banking Corporation Ltd and Waratah Finance Pty Ltd) represents amounts drawn

by the Consolidated Entity, at balance date, from three separate warehouse facilities whereby the equitable ownership of qualifying mortgage

receivables are sold whilst their legal ownership is retained. As the majority of the benefits associated with the sold receivables remains with

the Holding Entity, the transactions have been accounted for as a borrowing facility in these financial statements.

Consolidated

Credit Union

The borrowings from Credit Union Services Corporation (Australia) Ltd total NIL million (2010: $50.000 million).

On 18 November 2010 the Holding Entity established a new securitisation facility (Light Trust No. 3) and issued $530.000 million term

Residential Mortgage Backed Securities "RMBS".

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

25. CURRENT TAX PAYABLE

Current income tax payable 5,952 4,926 6,307 5,266

26. DEFERRED TAX LIABILITIES

The balance comprises temporary differences

attributable to:

Amounts recognised in profit or loss

Prepayments 1,001 927 1,001 927

Depreciation 2,083 1,798 2,083 1,798

Intangibles 3,275 5,454 3,275 5,454

Financial assets at fair value through profit or loss 957 2,434 - -

7,316 10,613 6,359 8,179

Amounts recognised directly in Equity

Cash flow hedges 34 32 34 32

Fair Value Reserve - Available for Sale Financial Assets 279 71 279 71 Total deferred tax liabilities 7,629 10,716 6,672 8,282

Movements:

Opening balance 10,716 2,134 8,282 1,046


Charged/(credited) to profit or loss (Note 8) (3,297) (1,434) (1,820) (1,434)

Charged/(credited) to Equity 210 8,141 210 6,795 Closing balance 7,629 10,716 6,672 8,282

6,393 8,139 6,393 8,139

Deferred tax liabilities to be settled within 12 months 1,236 2,577 279 143 7,629 10,716 6,672 8,282

27. EMPLOYEE BENEFITS

Provision for annual leave 5,464 4,365 5,534 4,415

Provision for banked hours 326 80 326 80

Provision for long service leave 7,712 7,683 7,754 7,704 13,502 12,128 13,614 12,199

a) Superannuation commitments

2011 2010 2011 2010

No. No. No. No.

b) Number of employees at year end

Equivalent full time 938 901 947 910


The basis of contributions to the funds is by way of employer and employee contributions. The obligation to contribute to the funds is to

ensure compliance with the superannuation guarantee charge.

Deferred income tax assets and liabilities are offset when there is a legally

enforceable right to offset current tax assets against current tax liabilities

and when the deferred income taxes relate to the same tax authority.

Deferred tax liabilities to be settled after more than 12 months

Credit Union

The Holding Entity has established superannuation funds for employees of the Consolidated Entity, which existed for the full financial year.

The benefit is the provision of retirement lump sums via accumulation type funds.

Consolidated

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

28. SUBORDINATED DEBT

At the beginning of the year 5,000 20,000 5,000 20,000


Repayment made during the year (5,000) (25,000) (5,000) (25,000)- 5,000 - 5,000

Deferred borrowing costs 668 668 668 668 Accumulated amortisation (668) (668) (668) (668)

- - - -

Net Subordinated unsecured notes - 5,000 - 5,000

2011 2010

$'000 $'000

29. REDEEMED PREFERENCE SHARE CAPITAL

Redeemed Member shares

Opening Balance 489 441

Transfer from retained earnings 18 48 Closing Balance 507 489

30. RESERVES

(i) General reserve for credit losses

(ii) Hedging reserve - cash flow hedges

(iii) Asset revaluation reserve

(iv) Retained Earnings

(v) Fair Value Reserve - Available-for-Sale Financial Assets

(vi) Other equity reserves

Credit Union


The other equity reserves represent the retained earnings of Savings & Loans Credit Union (S.A.) Limited recognised upon the merger with

the Holding Entity.

On the 31 July 2010 the Holding Entity repaid in full a $5.000 million Series 3 Subordinated Capital Notes issue maturing 31 July 2015. The

repayment of the issue was the result of the Holding Entity exercising its option under the Trust Deed to repay the entire face value of these

notes to registered holders on the 31 July 2010.

The Fair Value Reserve is the difference in the carrying amount and the fair value of the Available-for-Sale financial assets held by the

Consolidated Entity.

The Australian Prudential Regulatory Authority ("APRA") requires Authorised Deposit-Taking Institutions ("ADI's") to maintain a prescribed

level of provision for regulatory purposes. The difference between the impairment provisions calculated under AIFRS and those required by

APRA is represented by the General reserve for credit losses. The reserve has been appropriated from retained earnings.

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to

hedge transactions that have not yet occurred.

Retained earnings is the proportion of after-tax profit that is held by the Consolidated Entity.

Under the Corporations Act 2001 (S 254K), redeemable preference shares (Members $2 Shares) may only be redeemed out of the Credit

Union's profit or through a new issue of shares for the purpose of the redemption. The Holding Entity therefore has transferred the value of

member shares redeemed since 1 July 1999 (the date that the Corporations Act 2001 applied to the Holding Entity), from retained earnings

to the redeemed preference share capital account. The value of members shares for existing members is disclosed in Note 20.

The revaluation reserve relates to property, plant and equipment, and investment in controlled entities measured at fair value in accordance

with applicable Australian Accounting Standards.

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

31. CONCENTRATION OF ASSETS AND LIABILITIES

(a) Available-for-Sale financial assets42,000 62,050 42,000 62,050

(b) Loans and advances

South Australia 3,836,251 3,884,341 3,836,251 3,884,341

Northern Territory 540,223 523,801 540,223 523,801

Victoria 295,539 276,974 295,539 276,974

New South Wales 154,276 175,706 154,276 175,706

Western Australia 59,402 62,539 59,402 62,539

Queensland 56,894 55,557 56,894 55,557

Australian Capital Territory 7,602 7,746 7,602 7,746

Tasmania 4,987 3,222 4,987 3,222 4,955,174 4,989,886 4,955,174 4,989,886

(c) Member deposits

South Australia 3,008,837 2,915,107 3,008,411 2,914,785

Northern Territory 285,148 275,505 285,148 275,505

Victoria 211,138 230,229 211,138 230,229

New South Wales 343,707 344,523 343,707 344,523

Western Australia 29,919 25,759 29,919 25,759

Queensland 101,770 115,259 101,770 115,259

Australian Capital Territory 12,625 18,187 12,625 18,187

Tasmania 10,098 10,481 10,098 10,481 4,003,242 3,935,050 4,002,816 3,934,728

(d) Borrowings





Other 1,900 2,276 1,900 2,276 861,211 1,222,965 861,211 1,222,965

Deposits with Credit Union Services Corporation (Australia) Ltd

The Holding Entity has an exposure to groupings of individual deposits

which concentrate risk and create exposure to particular geographic

segments as follows:

The Holding Entity has an exposure to groupings of individual loans which

concentrate risk and create exposure to particular geographic segments as

follows:

As at 30 June 2011, the Holding Entity has no loan assets which represent

10% or more of capital (2010: $Nil).


As at 30 June 2011, the Holding Entity has no deposit liabilities with an

outstanding balance in excess of 10% or more of its total liabilities (2010:

$Nil).

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

32. COMMITMENTS

a) Capital expenditure commitments

Property, plant & equipment 305 3,663 305 3,663

Payable not later than 1 year 305 2,535 305 2,535

b) Lease expenditure commitments

Non-cancellable operating leases

not later than 1 year 11,566 13,256 11,821 13,452

later than 1 and not later than 2 years 8,337 10,988 8,602 10,988

later than 2 and not later than 5 years 18,081 16,061 18,854 16,061

later than 5 years 421 3,956 421 3,956

Aggregate lease expenditure contracted for at 30 June 38,405 44,261 39,698 44,457

2011 2010 2011 2010

$'000 $'000 $'000 $'000

(c) Credit commitments

Loans approved not disbursed 98,825 87,583 98,825 87,583

Members unused credit facility 397,977 451,990 397,977 451,990 496,802 539,573 496,802 539,573

33. CONTINGENCIES

2011 2010 2011 2010

$'000 $'000 $'000 $'000

(a) Guarantees

The Consolidated Entity has issued guarantees as follows:

Guarantee issued for members 1,694 2,471 1,694 2,471

(b) Credit Union Financial Support System Limited

Consolidated

Credit Union

Estimated capital expenditure contracted for at balance date but not

provided for:


May be required to advance permanent loans of up to 0.2% of total assets per financial year to another Credit Union requiring financial

support;

Details of contingent liabilities and contingent assets where the probability of further payments/receipts is not considered remote are set out

below, as well as details of contingent liabilities and contingent assets, which although considered remote, the Directors consider should be

disclosed.

With effect from 1 July 1999, the Holding Entity is a party to the Credit Union Financial Support System ("CUFSS"). CUFSS is a voluntary

scheme that all Credit Unions which are affiliated with Credit Unions Services Corporation (Australia) Limited ("Cuscal") have agreed to

participate in. CUFSS is a company limited by guarantee, each Credit Union's guarantee being $100. As a member of CUFSS, the Holding

Entity:

The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that the future sacrifice of

economic benefits will be required or the amount is not capable of reliable measurement.

Consolidated

The Consolidated Entity leases various office and branch premises under non-cancellable leases expiring within one to seven years. The

leases have varying terms, escalation clauses and renewal rights. On renewal the terms of the leases are renegotiated.

Agrees, in conjunction with other members, to fund the operating costs of CUFSS.

May be required to advance funds of up to 3% (excluding permanent loans) of total assets to another Credit Union requiring financial

support;

Credit Union

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2011 2010 2011 2010

$'000 $'000 $'000 $'000

34. STANDBY BORROWING FACILITIES

The Holding Entity has the following borrowing facilities:

(a) Overdraft facility

Gross facility amount 5,000 10,000 5,000 10,000

Less: current borrowing - - - - Net available 5,000 10,000 5,000 10,000

(b) Wholesale funding facilities (Note 23)

Gross facility amount 1,001,900 1,342,276 1,001,900 1,342,276

Less: current borrowing (861,211) (1,222,965) (861,211) (1,222,965)Net undrawn 140,689 119,311 140,689 119,311

35. SECURITISATION

2011 2010

$'000 $'000

Light Trust No.1 141,966 186,615

Light Trust No.2 129,599 176,615

Light Trust No.3 432,535 -

Waratah Finance Pty Ltd 517,224 649,398

Titan No. 12 Trust 159,995 231,290

Integrity Trust 1,900 2,276 1,383,219 1,246,194

2011 2010 2011 2010

$'000 $'000 $'000 $'000

36. AUDITORS' REMUNERATION

(a) Audit services

KPMG

Audit and review of the financial reports 184 263 210 273

Other regulatory audit services 28 29 31 29 212 292 241 302

(b) Taxation services KPMG 125 55 125 55

(c) Other assurance services KPMG 93 82 93 115

(d) Other services

KPMG

IT advisory - 3 - 3

Due Diligence - 70 - 70 - 73 - 73

During the year the following fees were paid or payable for services

provided by the auditor of the Consolidated Entity:

In the ordinary course of business, the Consolidated Entity enters into transactions that result in the transfer of financial assets to third parties

or special purpose entities on an arms length basis. The information below sets out the extent of such transfers, and the Consolidated Entity's

retained interest in transferred assets.



The Consolidated Entity has transferred retail mortgage loans and advances to Light Trust No. 1., Light Trust No. 2., Light Trust No. 3., Titan

No. 12 Trust, Waratah Finance Pty Ltd and Integrity Trust, but has retained substantially all of the risks and rewards associated with the

transferred assets. Due to the retention of substantially all the risks and rewards on these assets, the Consolidated Entity continues to

recognise these assets as loans and advances to members and the transfers are accounted for as secured financing transactions.

Consolidated

44

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37. INVESTMENT IN CONTROLLED ENTITIES

Name of entity 2011 2010 2011 2010

% % $ $

Australian Central Services Pty Ltd 100 100 - -

Australian Central Travel Pty Ltd 100 100 2 2

Financial Solutions Australasia Pty Ltd 100 100 4,987,973 4,987,973

70 Light Square Pty Ltd 100 100 - -

Flinders Finance Pty Ltd 100 100 160,000 160,000

Let's Talk Home Loans Group Pty Ltd 100 100 1 1

Austral Financial Planning Pty Ltd 100 100 1 1

38. ECONOMIC DEPENDENCY

The Holding Entity has an economic dependency on the following suppliers of services:

(a) Credit Union Services Corporation (Australia) Ltd

(b) First Data Resources Australia Ltd

(c) Datacom Systems

(d) Fiserv (ASPAC) Pte Ltd

(e) CU Technology Development Ltd

(f) Data Action Pty Ltd

This company provides the Holding Entity with the rights to and the production of members cheques, ATM management services, Redicards

and Visa cards, provides finance facilities, settlement with bankers, electronic funds deposit, central banking and money market services.

Book value of shares/units % held by Holding Entity

This company has been engaged to host a communication service for the Holding Entity.

This company is a member of an international group which owns core computer software which the Holding Entity operates.

This company operates a computer bureau which operates a processing system of the Holding Entity.

This company operates the switching system that links rediATM's, other approved EFT suppliers, Visa acquirers and merchants to the

Holding Entity's computer systems.

Australian Central Travel Pty Ltd, 70 Light Square Pty Ltd, Flinders Finance Pty Ltd, Let's Talk Home Loans Pty Ltd and Austral Financial

Planning Pty Ltd are small proprietary companies and have not been audited.

This company holds the Australian Credit Union licence for the Fiserv computer software and sub-licenses the software, and provides

ongoing support to the Holding Entity.

Australian Central Credit Union Ltd (trading as People's Choice Credit

Union)

All controlled entities are incorporated in Australia. All shares held are in ordinary shares. The amounts disclosed in relation to investments in

controlled entities in this note have not been rounded to the nearest one thousand dollars in order to disclose amounts which would otherwise

have been rounded down to zero.

45


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2011 2010 2011 2010

$'000 $'000 $'000 $'000

39. NOTES TO THE STATEMENTS OF CASH FLOWS

(a) Reconciliation of cash and cash equivalents

For purposes of the Statements of Cash Flows, cash

and cash equivalents comprise the following:

149,969 38,132 162,775 44,982

Available-for-Sale investment securities with maturity < 3 months 719,899 312,736 730,149 317,986

Held-to-Maturity investment securities with maturity < 3 months - 15,850 - 15,850

Overdraft - - - - 869,868 366,718 892,924 378,818

Profit for the period 32,248 22,158 33,039 22,983

Adjustments for:

Depreciation and amortisation 10,972 8,456 11,139 8,651

Increase in provision for impairment 558 421 558 421

Increase/(decrease) in provision for impairment on other investments (328) - (328) -

Amortisation of fair value adjustments upon merger 5,179 4,983 5,179 4,983

861 (5,971) (6,861) -

Bad debts written off 2,290 2,069 2,290 2,069

Dividend income classified as investing cash flow (5,648) (1,007) (5,648) (1,007)

Increase/(decrease) in provision for employee benefits 1,374 (521) 1,415 (528)

Increase in provision for income tax 1,026 4,926 1,041 5,266

Increase in current tax assets 5,295 2,923 3,803 2,508

Decrease in provision for deferred tax (3,087) (1,242) (1,610) (1,244)

(16) 272 (16) 272

Change in assets and liabilities:

Increase in interest payable 4,552 5,247 3,536 5,390

Increase/(decrease) in payables and other liabilities (15,926) 10,455 4,652 8,778

Decrease in net loans and advances 33,929 17,753 33,929 17,753

(Increase)/decrease in interest receivable 2,809 (7,751) 2,809 (7,744)

Increase/(decrease) in other financial assets/liabilities (4,893) (4,633) (4,893) (4,633)

(Increase)/decrease in other assets 3,752 (7,391) 1,973 (6,817)

Net cash from operating activities 74,947 51,147 86,007 57,101

(b) Reconciliation of profit after income tax to net cash from operating

activities

Consolidated

Net (profit)/loss on sale of property, plant & equipment

Credit Union

Cash and cash equivalents

Net change in fair value of financial assets/liabilities at fair value through

profit or loss

46

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40. RELATED PARTIES

(a) Directors

(i) Chair - Non-Executive

W. R. Cossey AM

(ii) Deputy Chair - Non-Executive

J.L. Cossons

(iii) Executive Director

P.H.T. Evers (Managing Director)

(iv) Non-Executive Directors

Dr. R. H. S. Brooks

S. M. Day

E. T. McGuirk

J. McMahon

K. A. Skipper AM

(b) Other key management personnel

Name Position

D. Bateman General Manager Advice and Relationships

A. Hamilton General Manager Marketing and Product Management

General Manager Technology

General Manager Retail Banking

D. Mattiske-Wood General Manager Organisational Development

G. Strawbridge General Manager Finance and Treasury

General Manager Risk

(c) Key management personnel compensation

2011 2010 2011 2010

$'000 $'000 $'000 $'000

3,081 2,231 3,081 2,231

188 152 188 152

149 81 149 81 Termination benefits - 200 - 200

3,418 2,583 3,418 2,664

(d) Loans to key management personnel

Loans

Post-employment benefits - superannuation

Loans to Directors and key management personnel are either unsecured or secured by registered mortgage over eligible

security in accordance with standard lending policies.

Other long term benefits

Consolidated

L. Wilkinson

Short-term employee benefits

The following were Directors of the Consolidated Entity from the beginning of the financial year to the date of this report.

The following persons, employed by the Holding Company, also had authority and responsibility for planning, directing and

controlling the activities of the Consolidated Entity, directly or indirectly, during the financial year:

T. Hampton

D. Lewis

Key management personnel compensation comprised:

Credit Union

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40. RELATED PARTIES (Continued)

(d) Loans to key management personnel (continued)

(i) Aggregates for key management personnel

Consolidated

$'000 $'000 $'000

2011 3,973 264 4,029

2010 2,770 205 3,973

(e) Other transactions with key management personnel

(f) Non-key management personnel disclosures

Controlled entities

Key personnel

(ii) Transactions with related parties

2011 2010

$'000 $'000

Financial Solutions Australasia Pty Ltd

Management fee income 210 206 Receivable - 1,776 Payable 17 -

Australian Central Services Pty Ltd

Management fee income 96 63

Payable 70 39

As required to be a member of the Holding Entity, each Key Management Personnel holds one $2 share.

(i) The Holding Entity has related party transactions with its subsidiaries with the transactions set out below.

Opening

Balance

Interest paid and

payable for the

year Closing Balance

All loans to management personnel are made on normal staff terms and conditions that are applicable to normal staff

benefit packages.

The key management personnel who conducted loan accounts with the Holding Entity during the year were W.R. Cossey

AM, J.L. Cossons, K.A. Skipper AM, P.H.T. Evers, A. Hamilton, G. Strawbridge, D. Lewis, T. Hampton and L. Wilkinson.

Apart from the details disclosed in this note, no key management personnel has entered into a material contract with the

Holding Entity or the Consolidated Entity since the end of the previous year and there were no material contracts involving

Key Management personnel interests existing at year end.

All Loans to Directors including their related parties are made on normal member terms and conditions which apply to each

class of loan.

Credit Union

Aggregate amounts included in the Holding Entity accounts that resulted from

transactions with Australian Central Services Pty Ltd:

Interests in controlled entities are set out in Note 37.

Disclosures relating to key management personnel of the Consolidated Entity are set out in Note 40 (b) to (e).


transactions with Financial Solutions Australasia Pty Ltd:

48

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40. RELATED PARTIES (Continued)

(f) Non-key management personnel disclosures (continued)

(ii) Transactions with related parties (continued)

2011 2010

$'000 $'000

Light Trust No. 1

Residual unitholder income 1,848 (217)

Loan 141,966 186,615

Net Swap Income 825 1,662

Light Trust No. 2

Residual unitholder income 5,105 (3,662)

Loan 129,599 176,615

Net Swap Income 4,683 4,309

Light Trust No. 3

Residual unitholder income 3,364 -

Loan 432,535 -

Net Swap Income/(Expense) (2,215) -

Flinders Finance Pty Ltd

Interest Paid by the Holding Entity 7 3

Let's Talk Home Loans Group Pty Ltd

Other Revenue received by the Holding Entity 28 24

Interest Paid by the Holding Entity 8 7


transactions with Light Trust No. 2:



Credit Union

Let's Talk Home Loans Group Pty Ltd has funds on deposit with the Holding Entity of

$187,560 (2010: $140,884) for which it is paid a commercial interest rate.




transactions with Flinders Finance Pty Ltd:


transactions with Let's Talk Home Loans Group Pty Ltd:

Flinders Finance Pty Ltd has funds on deposit with the Holding Entity of $238,416

(2010: $180,930) for which it is paid a commercial interest rate.

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1152

Notes to the Financial StatementsAUSTRALIAN CENTRAL CREDIT UNION LTD (trading as People's Choice Credit Union) AND ITS CONTROLLED ENTITIESNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2011

41. FINANCIAL INSTRUMENTS

a) Financial risk management objectives

b) Terms, conditions and accounting policies

c) Liquidity risk management

2011 2010

Liquidity holdings 15.03% 17.51%

Credit Union

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Consolidated Entity'sapproach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilitieswhen due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to its reputation.

APRA Prudential standards place specific management and reporting requirements on credit unions in relation to liquidity risk. ThePrudential Standards provide that liquidity strategies and liquidity holdings can be based on either a scenario analysis or on aminimum liquidity holdings basis. APRA has approved the adoption by the Holding Entity of a minimum liquidity holding basiswhereby the Holding Entity is required to maintain a minimum holding in specified HQLA at all times. The Holding Entity and theConsolidated Entity complied with all APRA liquidity requirements throughout the year. The Holding Entity's HQLA liquidity ratio asat the end of the reporting period (30 June) and the comparative period were as follows:

The Holding Entity and the Consolidated Entity as part of its daily operations is exposed to a range of risks. The management ofthese risk exposures involves a number of activities including the identification of particular risks, quantifying the risk exposure,implementing procedures to control and mitigate the risks, and risk reporting.

The Holding Entity and the Consolidated Entity have in place an enterprise wide risk management process. The process ismanaged though the Risk Committee, and is supported by a documented risk management plan, risk policies and strategies,internal controls and procedures and a Business Risk and Continuity Plan.

The risk management process involves establishing the context and the identification, analysis, treatment, communication andongoing monitoring of risks. A risk register has been established as part of the risk management process that enables a structuredand logical assessment and reporting of identified risks including their consequences and likelihood, and the assessment ofestablished risk mitigation controls.

The Consolidated Entity's accounting policies, including terms and conditions of each class of financial asset, financial liability andequity instrument, both recognised and unrecognised at the balance date, are disclosed in Note 1.

The Consolidated Entity has in place information systems and a structured process to monitor and manage liquidity risk. Themanagement process incorporates specific liquidity management strategies and liquidity contingency plans that manage liquidityon a daily basis under normal situations and assumed adverse scenarios. The liquidity strategy requires the holding of surplusfunds in high quality liquid assets ("HQLA"), the availability of appropriate standby lines of funding, maintenance of reliable sourcesof funding (retail and wholesale) and daily liquidity projections.

50

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Not

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The

table

sbelo

wsum

marise

the

matu

rity

pro

file

of

the

Conso

lidate

dE

ntit

y's

and

the

Hold

ing

Entit

y's

financia

llia

bili

ties

as

at

30

June

2011

based

on

contr

actu

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undis

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paym

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ns.

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edia

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Hold

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ent

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st

date

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ate

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ycould

be

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the

table

sdo

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ate

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tory

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ned

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to their c

ontr

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al m

atu

rity

.

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ntr

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th

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on

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on

ths

1

-5 y

ea

rs

51


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41. FINANCIAL INSTRUMENTS (Continued)

d) Credit risk management

Note

2011 2010

$'000 $'000

Cash and cash equivalents 10 162,775 44,982

Trade and other receivables 11 22,026 28,408

Loans and advances 12 4,945,994 4,979,923

14 842,149 822,627

14 - 35,850

18 324 107

21 11,085 22,622

5,984,353 5,934,519

2011 2010 2011 2010

$'000 $'000 $'000 $'000

403 109 - -

2,454 1,074 - -

2,857 1,183 - -

(2,479) (850) - -

Carrying amount 378 333 - -

1 - 30 days 117,730 165,133 - -

31 - 60 days 19,587 8,625 - -

61 - 90 days 7,641 3,946 - -

6,201 5,046 - -

151,159 182,750 - -

(2,198) (3,269) - -

Carrying Amount 148,961 179,481 - -

4,801,158 4,805,953 48,930 31,282

8,259 6,957 - -

4,950,497 4,985,767 48,930 31,282

- Other loans

Gross amount

Gross amount

90 days +

Less: Allowance for impairment

Total Carrying Amount

Past due but not impaired

Neither past due nor impaired

Less: Allowance for impairment

Includes accounts with renegotiated terms

Available-for-Sale investment securities

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to theConsolidated Entity. The Consolidated Entity has adopted a policy of only dealing with credit worthy counterparties and obtainingsufficient or other security where appropriate, as a means of mitigating the risk of financial loss from defaults.

The Group holds collateral against loans and advances to members in the form of mortgage interests over real property. Estimatesof fair value are based on the value of collateral assessed at the time of borrowing, and generally are not updated except when aloan is individually assessed as impaired.

The Consolidated Entity's maximum exposure to credit risk at the reporting date was:

The Consolidated Entity's maximum exposure to credit risk at balance date in relation to each class of recognised financial assets isthe carrying amount of those assets as indicated in the statement of financial position. The maximum credit exposure does not takeinto account the value of any collateral or other security held, in the event other entities/parties fail to perform their obligations underthe financial instruments in question. Collateral takes the form of mortgage interests over real property. The value of collateral heldagainst individual exposures is generally only assessed at the time of borrowing or when a specific review of that exposure isundertaken in accordance with policy.

Consolidated

Exposure to credit risk

Held-to-Maturity Investment securities

Exposure to credit risk

Individually impaired

Interest rate swaps used for hedging

Investment Securities

Loans and advances to

members

Financial assets at fair value through profit or loss

- Mortgage secured

52

55

An

nu

al R

epor

t 20

11







e) Capital adequacy

2011 2010$'000 $'000

Total qualifying capital 346,991 307,204 Risk Weighted Assets 2,633.891 2,462,761 Capital Adequacy Ratio 13.17% 12.47%

f) Market risk management

g) Market risk sensitivity analysis

30 June 2011 30 June 201050 bp rise 50 bp fall 100 bp rise 100 bp fall 50 bp rise 50 bp fall 100 bp rise 100 bp fall

Holding Entity

Equity Sensitivity 0.11% (0.10%) 0.01% (0.21%) 0.69% (0.67%) 1.36% (1.36%)Net Revenue Sensitivity 2.49% (1.97%) 4.97% (3.94%) 0.92% (1.36%) 2.33% (2.11%)Consolidated

Equity Sensitivity 0.21% (0.42%) 0.62% (0.84%) 0.29% (0.28%) 0.58% (0.56%)Net Revenue Sensitivity 1.73% (1.22%) 3.46% (2.44%) 0.77% (1.21%) 2.02% (1.81%)

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of theConsolidated Entity's net interest revenue and net financial assets or "market value of equity" to standard interest rate scenarios.Standard interest rate scenarios include 50 and 100 basis point (bp) parallel falls and rises in all yield curves. Sensitivity outcomesare assessed relative to either a 12 month forecast net interest margin sensitivity, or the Consolidated Entity's current capital base,for market value of equity sensitivity.

The management of interest rate risk is explained in more detail at Note (h) below.

The management of the capital of a financial institution is a fundamental part of its risk management process as an essentialelement of capital is its availability to absorb future, unexpected and unidentified losses.

APRA Prudential Standards require ADI's to maintain at all times a minimum ratio of capital to risk weighted assets. As part of itsrisk management process, the Holding Entity has developed a methodology with financial modelling to assist in determining theoptimum level of capital that is consistent with assessed risk exposure and business activity. The optimum capital is managed withina range well above the minimum required by APRA and incorporates an assessment of the combined risk exposure for operations,market, credit and strategic risk.

Market risk is the risk of exposure to changes to financial prices affecting the value of positions held by the Holding Entity as part ofits normal trading activities. As the Holding Entity does not deal in foreign exchange contracts or commodities, market risk for theConsolidated Entity consists solely of interest rate risk.

The capital management plan ensures the ongoing capital management of the Holding Entity is maintained with the level and extentof the risks the Holding Entity is exposed to from its activities. The Holding Entity and Consolidated Entity complied with all APRAcapital adequacy requirements throughout the year.

Consolidated

53


An

nu

al R

epor

t 20

1156

Not

es t

o th

e F

inan

cial

Sta

tem

ents

Aus

tral

ian

Cent

ral C

redi

t Uni

on L

td (t

radi

ng a

s Pe

ople

’s Ch

oice

Cre

dit U

nion

) and

its

Cont

rolle

d En

titie

s

Ann

ual F

inan

cial

Rep

ort f

or th

e ye

ar e

nded

30

Jun

e 20

11

AU

STR

ALI

AN

CEN

TRA

L C

RED

IT U

NIO

N L

TD (t

radi

ng a

s Pe

ople

's C

hoic

e C

redi

t Uni

on)

AN

D IT

S C

ON

TRO

LLED

EN

TITI

ESN

OTE

S TO

TH

E FI

NA

NC

IAL

STA

TEM

ENTS

FOR

TH

E Y

EA

R E

ND

ED

30

JUN

E 2

011

41. F

INA

NC

IAL

INST

RU

MEN

TS (C

ontin

ued)

h) In

tere

st ra

te ri

sk m

anag

emen

t

Hol

ding

Ent

ity

Fixe

d in

tere

st ra

te m

atur

ing

in :

Fina

ncia

l ins

trum

ents

Floa

ting

inte

rest

rate

1 ye

ar o

r les

sO

ver 1

to 5

ye

ars

Mor

e th

an 5

ye

ars

Non

inte

rest

bea

ring

Tota

l car

ryin

g am

ount

as

per

Stat

emen

t of F

inan

cial

Po

sitio

n W

eigh

ted

aver

age

effe

ctiv

e in

tere

st ra

te

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

%%

(i) F

inan

cial

ass

ets

Cas

h an

d ca

sh e

quiv

alen

ts12

1,55

0

9,

650

-

-

-

-

-

-

28,4

18

28

,482

149,

968

38,1

32

3.

85%

1.05

%

Trad

e an

d ot

her r

ecei

vabl

es-

-

-

-

-

-

-

-

21,7

71

29

,860

21,7

71

29

,860

--

Loan

s an

d ad

vanc

es3,

269,

653

3,

045,

717

42

1,23

0

50

9,07

0

1,

185,

013

1,

313,

942

70

,098

111,

194

-

-

4,94

5,99

4

4,97

9,92

3

7.61

%7.

25%

Inve

stm

ents

:-

-

-

-

A

vaila

ble-

for-

Sal

e in

vest

men

t sec

uriti

es-

-

77

1,50

0

77

4,93

5

60

,000

41,0

00

-

-

39

9

1,

433

83

1,89

9

81

7,36

8

5.

48%

5.73

% H

eld-

to-M

atur

ity in

vest

men

t sec

uriti

es-

-

-

35

,850

-

-

-

-

-

-

-

35,8

50

-

4.

91%

Oth

er in

vest

men

ts-

-

30

,700

-

-

-

-

-

18

,230

31,2

52

48

,930

31,2

52

4.

31%

-

Tota

l fin

anci

al a

sset

s3,

391,

203

3,05

5,36

7

1,22

3,43

01,

319,

855

1,

245,

013

1,35

4,94

2

70,0

9811

1,19

4

68

,818

91,0

27

5,

998,

562

5,93

2,38

5

7.15

%6.

93%

(ii) F

inan

cial

liab

ilitie

s

Dep

osits

1,89

0,69

3

1,76

9,60

9

1,99

8,14

8

2,04

0,75

8

114,

233

81,0

99

16

8

-

-

43

,584

4,00

3,24

2

3,93

5,05

0

4.82

%4.

55%

Oth

er fi

nanc

ial l

iabi

litie

sTr

ade

and

othe

r pay

able

s-

-

70

4,10

0

36

3,23

0

-

-

-

-

78

,178

89,4

64

78

2,27

8

45

2,69

4

5.

36%

4.45

%B

orro

win

gs-

-

86

1,21

1

1,

222,

965

-

-

-

-

-

-

86

1,21

1

1,

222,

965

6.

12%

5.84

%N

otes

Pay

able

-

-

-

-

-

-

-

-

-

-

-

-

--

Sub

ordi

nate

d de

bt-

-

-

5,

000

-

-

-

-

-

-

-

5,

000

-

9.51

%

Tota

l fin

anci

al li

abili

ties

1,89

0,69

31,

769,

609

3,

563,

459

3,63

1,95

3

114,

233

81,0

99

16

8

-

78,1

7813

3,04

8

5,

646,

731

5,61

5,70

9

5.09

%4.

83%

(iii)

Inte

rest

rate

sw

aps

1,48

8,66

6

1,48

6,53

5

(822

,171

)

(550

,745

)

(617

,734

)

(933

,790

)

(48,

761)

(2,0

00)

-

-

(10,

371)

-

(1.1

8%)

(1.7

1%)

The

Hol

ding

Ent

ity a

nd th

e C

onso

lidat

ed E

ntity

's e

xpos

ure

to in

tere

st ra

te ri

sks

and

the

effe

ctiv

e in

tere

st ra

tes

of fi

nanc

ial a

sset

s an

d fin

anci

al li

abili

ties

at th

e ba

lanc

e da

te, a

re a

s fo

llow

s:

Bot

hth

eH

oldi

ngE

ntity

'san

dth

eC

onso

lidat

edE

ntity

'sac

tiviti

espr

imar

ilyex

pose

them

toth

efin

anci

alris

ksof

chan

ges

inin

tere

stra

tes.

The

Hol

ding

Ent

ityut

ilise

sex

tens

ive

mod

ellin

gte

chni

ques

toid

entif

yth

eva

lue

atris

kto

neti

nter

esti

ncom

ean

dth

em

arke

tval

ueof

equi

ty,g

iven

anu

mbe

rofa

ssum

edch

ange

sin

mar

keti

nter

estr

ates

.The

Boa

rdha

sin

plac

ea

mar

ketr

isk

polic

yw

hich

sets

risk

limits

abov

ew

hich

the

Hol

ding

Ent

ityis

requ

ired

toac

tivel

yhe

dge

itsex

posu

reth

roug

hth

eus

e of

on-

bala

nce

shee

t met

hods

or t

hrou

gh fi

nanc

ial i

nstru

men

ts s

uch

as in

tere

st ra

te s

wap

s.

54

57

An

nu

al R

epor

t 20

11


Not

es t

o th

e F

inan

cial

Sta

tem

ents

Aus

tral

ian

Cent

ral C

redi

t Uni

on L

td (t

radi

ng a

s Pe

ople

’s Ch

oice

Cre

dit U

nion

) and

its

Cont

rolle

d En

titie

s

Ann

ual F

inan

cial

Rep

ort f

or th

e ye

ar e

nded

30

Jun

e 20

11

AU

ST

RA

LIA

N C

EN

TR

AL

CR

ED

IT U

NIO

N L

TD

(tr

ad

ing

as

Pe

op

le's

Ch

oic

e C

red

it U

nio

n)

AN

D I

TS

CO

NT

RO

LL

ED

EN

TIT

IES

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

FO

R T

HE

YE

AR

EN

DE

D 3

0 J

UN

E 2

01

1

41

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S (

Co

nti

nu

ed

)

h)

Inte

res

t ra

te r

isk

ma

na

ge

me

nt

(co

nti

nu

ed

)

Co

ns

olid

ate

d

Fix

ed

in

tere

st

rate

matu

rin

g i

n :

Fin

an

cia

l in

str

um

en

ts1 y

ear

or

less

Over

1 t

o 5

years

Mo

re t

han

5

years

N

on

in

tere

st

beari

ng

To

tal

carr

yin

g a

mo

un

t as p

er

Sta

tem

en

t o

f F

inan

cia

l

Po

sit

ion

Weig

hte

d a

vera

ge e

ffecti

ve

inte

rest

rate

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

$'0

00

%%

(i)

Fin

an

cia

l assets

Cash a

nd c

ash e

quiv

ale

nts

121,5

50

9,6

50

-

-

-

-

-

-

41,2

25

35,3

32

162,7

75

44,9

82

3.5

5%

-

Tra

de a

nd o

ther

receiv

able

s-

-

-

-

-

-

-

-

22,0

26

28,4

08

22,0

26

28,4

08

--

Loans a

nd a

dvances

3,2

69,6

53

3,0

45,7

17

421,2

30

509,0

70

1,1

85,0

13

1,3

13,9

42

70,0

98

111,1

94

-

-

4,9

45,9

94

4,9

79,9

23

7.6

1%

7.2

5%

Investm

ents

:-

-

-

A

vaila

ble

-for-

Sale

investm

ent

securitie

s-

-

781,7

59

780,1

85

60,0

00

41,0

00

-

-

390

1,4

42

842,1

49

822,6

27

5.4

8%

5.7

3%

H

eld

-to-M

atu

rity

investm

ent

securitie

s-

-

-

35,8

50

-

-

-

-

-

-

-

35,8

50

-4.9

1%

O

ther

investm

ents

-

-

-

-

-

-

-

-

13,0

82

12,9

05

13,0

82

12,9

05

--

To

tal

fin

an

cia

l assets

3,3

91,2

03

3,0

55,3

67

1,2

02,9

89

1,3

25,1

05

1,2

45,0

13

1,3

54,9

42

70,0

98

111,1

94

76,7

23

78,0

87

5,9

86,0

26

5,9

24,6

95

7.1

4%

6.9

3%

(ii)

Fin

an

cia

l li

ab

ilit

ies

Deposits

1,8

90,6

93

1,7

69,6

09

1,9

97,7

22

2,0

40,4

36

114,2

33

81,0

99

168

-

-

43,5

84

4,0

02,8

16

3,9

34,7

28

4.8

2%

4.5

5%

Oth

er

financia

l lia

bili

ties

-

Tra

de a

nd o

ther

paya

ble

s-

-

-

-

-

-

-

-

100,9

95

92,8

98

101,0

86

92,8

98

--

Borr

ow

ing

s-

-

861,2

11

1,2

22,9

65

-

-

-

-

-

-

861,2

11

1,2

22,9

65

6.1

2%

5.8

4%

Note

s P

aya

ble

-

-

673,4

00

350,0

30

-

-

-

-

-

-

673,4

00

350,0

30

5.9

3%

5.7

4%

Subord

inate

d d

ebt

-

-

-

5,0

00

-

-

-

-

-

-

-

5,0

00

-

9.5

1%

To

tal

fin

an

cia

l li

ab

ilit

ies

1,8

90,6

93

1,7

69,6

09

3,5

32,3

33

3,6

18,4

31

114,2

33

81,0

99

168

-

100,9

95

136,4

82

5,6

38,5

13

5,6

05,6

21

5.0

6%

4.8

3%

(iii

) In

tere

st

rate

sw

ap

s

775,6

19

(1

,120,8

08)

(2

16,0

00)

(474,4

19)

(5

57,6

19)

(646,3

88)

(2,0

00)

-

-

-

(10,7

61)

-

(1

.18%

)(1

.71%

)

Flo

ati

ng

in

tere

st

rate

55


An

nu

al R

epor

t 20

1158

Not

es t

o th

e F

inan

cial

Sta

tem

ents

Aus

tral

ian

Cent

ral C

redi

t Uni

on L

td (t

radi

ng a

s Pe

ople

’s Ch

oice

Cre

dit U

nion

) and

its

Cont

rolle

d En

titie

s

Ann

ual F

inan

cial

Rep

ort f

or th

e ye

ar e

nded

30

Jun

e 20

11A

US

TR

AL

IAN

CE

NT

RA

L C

RE

DIT

UN

ION

LT

D (

tra

din

g a

s P

eo

ple

's C

ho

ice

Cre

dit

Un

ion

)

AN

D IT

S C

ON

TR

OL

LE

D E

NT

ITIE

S

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

FO

R T

HE

YE

AR

EN

DE

D 3

0 J

UN

E 2

01

1

41

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S (

Co

nti

nu

ed

)

i) N

et

fair

va

lue

s

Carr

yin

g

am

ou

nt

Fair

valu

eC

arr

ying

am

ount

Fair v

alu

eM

eth

od

s a

nd

assu

mp

tio

ns u

sed

to

dete

rmin

e n

et

fair

valu

es

Ho

ldin

g E

nti

tyN

ote

$'0

00

$'0

00

$'0

00

$'0

00

Assets

carr

ied

at

fair

valu

e

Availa

ble

-for-

Sale

investm

ent securities

14

831,8

99

831,8

99

817,3

68

817,3

68

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

Oth

er

investm

ents

14

48,9

30

48,9

30

31,2

52

31,2

52

Oth

er

investm

ents

repre

sents

share

sin

unlis

ted

com

panie

sfo

rw

hic

hfa

irvalu

ecannot

be

relia

bly

measure

das

no

active

mark

et exi

sts

for

these a

ssets

. T

here

are

no c

urr

ent in

tentions to d

ispose o

f th

ese investm

ent.

880,8

29

880,8

29

848,6

20

848,6

20

Assets

carr

ied

at

am

ort

ised

co

st

Cash a

nd c

ash e

quiv

ale

nts

10

149,9

68

149,9

68

38,1

32

38,1

32

Bein

g c

ash a

t call

deposits, th

e c

arr

ying a

mount is

the n

et fa

ir v

alu

e.

Tra

de a

nd o

ther

receiv

able

s11

21,7

71

21,7

71

29,8

60

29,8

60

Carr

ying

am

ount

has

been

assum

ed

for

net

fair

valu

eas

there

are

no

mark

ets

for

these

assets

but,

should

they

be

redeem

ed,

it is e

xpecte

d that th

eir c

arr

ying a

mount w

ould

be r

ecovere

d.

Loans a

nd a

dvances

12

4,9

45,9

94

4,9

50,0

87

4,9

79,9

23

4,9

88,5

82

The

netfa

irvalu

eofim

paired

loans

has

been

estim

ate

db

yth

eir

carr

ying

am

ountnet

ofth

eaggre

gate

pro

vis

ion

for

impairm

ent.

The

netfa

irvalu

eofoth

er

loans

has

been

estim

ate

dusin

gdis

counte

dcash

flow

analy

sis

,based

on

curr

ent

rate

soffere

dby

the

Consolid

ate

d E

ntity

for

loans w

ith s

imila

r te

rms.

Held

-to-M

atu

rity

investm

ent securities

14

-

-

35,8

50

35,9

13

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

5,1

17,7

33

5,1

21,8

26

5,0

83,7

65

5,0

92,4

87

Lia

bilit

ies c

arr

ied

at

fair

valu

e

Inte

rest ra

te s

waps

18,2

1(1

0,3

71)

(10,3

71)

(14,4

02)

(14,4

02)

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

(10,3

71)

(10,3

71)

(14,4

02)

(14,4

02)

Lia

bilit

ies c

arr

ied

at

am

ort

ised

co

st

Deposits

20

4,0

03,2

42

3,9

80,2

23

3,9

35,0

50

3,9

40,2

13

The

net

fair

valu

eof

deposits

has

been

estim

ate

dusin

gdis

counte

dcash

flow

analy

sis

,based

on

curr

ent

rate

soffere

dby

the

Consolid

ate

d E

ntity

for

deposits w

ith s

imila

r te

rms.

Tra

de a

nd o

ther

paya

ble

s22

782,2

78

782,2

78

452,6

94

452,6

94

Carr

ying a

mount appro

xim

ate

s n

et fa

ir v

alu

e b

ecause o

f th

e s

hort

term

to s

ettle

ment of th

e a

mounts

due.

Borr

ow

ings

23

861,2

11

865,5

73

1,2

22,9

65

1,2

26,8

88

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

Note

s P

aya

ble

24

-

-

-

-

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

Subord

inate

d d

ebt

28

-

-

5,0

00

5,1

11

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

5,6

46,7

31

5,6

28,0

74

5,6

15,7

09

5,6

24,9

06

Th

e f

air v

alu

es o

f fin

an

cia

l a

sse

ts a

nd

fin

an

cia

l lia

bili

tie

s,

tog

eth

er

with

th

e c

arr

yin

g a

mo

un

ts s

ho

wn

in

th

e s

tate

me

nt

of

fin

an

cia

l p

ositio

n a

re a

s f

ollo

ws:

30

Ju

ne

20

11

30

Ju

ne

20

10

56

59

An

nu

al R

epor

t 20

11


Not

es t

o th

e F

inan

cial

Sta

tem

ents

Aus

tral

ian

Cent

ral C

redi

t Uni

on L

td (t

radi

ng a

s Pe

ople

’s Ch

oice

Cre

dit U

nion

) and

its

Cont

rolle

d En

titie

s

Ann

ual F

inan

cial

Rep

ort f

or th

e ye

ar e

nded

30

Jun

e 20

11A

US

TR

AL

IAN

CE

NT

RA

L C

RE

DIT

UN

ION

LT

D (

tra

din

g a

s P

eo

ple

's C

ho

ice

Cre

dit

Un

ion

)

AN

D IT

S C

ON

TR

OL

LE

D E

NT

ITIE

S

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

FO

R T

HE

YE

AR

EN

DE

D 3

0 J

UN

E 2

01

1

41

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S (

Co

nti

nu

ed

)

i) N

et

fair

va

lue

s (

co

nti

nu

ed

)

Ca

rryin

g

am

ou

nt

Fa

ir v

alu

eC

arr

yin

g

am

ou

nt

Fa

ir v

alu

eM

eth

od

s a

nd

as

su

mp

tio

ns

us

ed

to

de

term

ine

ne

t fa

ir v

alu

es

Co

ns

oli

da

ted

No

te$

'00

0$

'00

0$

'00

0$

'00

0A

ssets

carr

ied

at

fair

valu

e

Availa

ble

-for-

Sale

investm

ent securities

14

842,1

49

842,1

49

822,6

27

822,6

27

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

Oth

er

investm

ents

14

13,0

82

13,0

82

12,9

05

12,9

05

Oth

er

investm

ents

repre

sents

share

sin

unlis

ted

com

panie

sfo

rw

hic

hfa

irvalu

ecannot

be

relia

bly

measure

das

no

active

mark

et exi

sts

for

these a

ssets

. T

here

are

no c

urr

ent in

tentions to d

ispose o

f th

ese investm

ent.

855,2

31

855,2

31

835,5

32

835,5

32

Assets

carr

ied

at

am

ort

ised

co

st

Cash a

nd c

ash e

quiv

ale

nts

10

162,7

75

162,7

75

44,9

82

44,9

82

Bein

g c

ash a

t call

deposits, th

e c

arr

ying a

mount is

the n

et fa

ir v

alu

e.

Tra

de a

nd o

ther

receiv

able

s11

22,0

26

22,0

26

28,4

08

28,4

08

Carr

ying

am

ount

has

been

assum

ed

for

net

fair

valu

eas

there

are

no

mark

ets

for

these

assets

but,

should

they

be

redeem

ed,

it is e

xpecte

d that th

eir c

arr

ying a

mount w

ould

be r

ecovere

d.

Loans a

nd a

dvances

12

4,9

45,9

94

4,9

50,0

87

4,9

79,9

23

4,9

88,5

82

The

netfa

irvalu

eofim

paired

loans

has

been

estim

ate

db

yth

eir

carr

ying

am

ountnet

ofth

eaggre

gate

pro

vis

ion

for

impairm

ent.

The

netfa

irvalu

eofoth

er

loans

has

been

estim

ate

dusin

gdis

counte

dcash

flow

analy

sis

,based

on

curr

ent

rate

soffere

dby

the

Consolid

ate

d E

ntity

for

loans w

ith s

imila

r te

rms.

Held

-to-M

atu

rity

investm

ent securities

14

-

-

35,8

50

35,9

13

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

5,1

30,7

95

5,1

34,8

88

5,0

89,1

63

5,0

97,8

85

Lia

bilit

ies c

arr

ied

at

fair

valu

e

Inte

rest ra

te s

waps

18,2

1(1

0,7

61)

(10,7

61)

(22,5

15)

(22,5

15)

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

(10,7

61)

(10,7

61)

(22,5

15)

(22,5

15)

Lia

bilit

ies c

arr

ied

at

am

ort

ised

co

st

Deposits

20

4,0

02,8

16

3,9

80,2

23

3,9

34,7

28

3,9

40,5

36

The

net

fair

valu

eof

deposits

has

been

estim

ate

dusin

gdis

counte

dcash

flow

analy

sis

,based

on

curr

ent

rate

soffere

dby

the

Consolid

ate

d E

ntity

for

deposits w

ith s

imila

r te

rms.

Tra

de a

nd o

ther

paya

ble

s22

101,0

86

101,0

86

92,8

98

92,8

98

Carr

ying a

mount appro

xim

ate

s n

et fa

ir v

alu

e b

ecause o

f th

e s

hort

term

to s

ettle

ment of th

e a

mounts

due.

Borr

ow

ings

23

861,2

11

865,5

73

1,2

22,9

65

1,2

26,8

88

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

Note

s P

aya

ble

24

673,4

00

676,8

11

350,0

30

350,5

74

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

Subord

inate

d d

ebt

28

-

-

5,0

00

5,1

11

Estim

ate

d u

sin

g d

iscounte

d c

ash flo

w a

naly

sis

, based o

n c

urr

ent m

ark

et ra

tes for

sim

ilar

arr

angem

ents

.

5,6

38,5

13

5,6

23,6

93

5,6

05,6

21

5,6

16,0

07

30

Ju

ne

20

11

30

Ju

ne

20

10

57


An

nu

al R

epor

t 20

1160






i) Net fair values (continued)

Interest rates used for determining fair values

2011 2010

%

Loans and advances 6.4% - 15.5%

Investment securities 4.7% - 6.6%

Deposits 0.0% - 7.2%

Borrowings 6.0% - 7.0%

Notes Payable 4.9% - 6.9%

Subordinated debt 9.5% - 10.4%

Derivatives 4.7% - 5.6%

j) Interest rate swap contracts

Fair Value

Notional principal

amount

2011 2010 2011 2010 2011 2010

% % $'000 $'000 $'000 $'000

Holding Entity

Less than 1 year 6.65% 6.91% (1,494) (11,095) 822,171 553,738

1 to 2 years 6.42% 6.52% (5,133) (4,302) 347,115 346,751

2 to 5 years 6.17% 6.74% (3,744) 995 319,381 586,047 6.50% 6.75% (10,371) (14,402) 1,488,667 1,486,535

Consolidated

Less than 1 year 6.02% 6.88% (1,394) (14,169) 216,000 477,412

1 to 2 years 6.15% 6.35% (5,160) (6,301) 287,000 270,425

2 to 5 years 5.98% 6.52% (4,207) (2,045) 272,619 372,971 6.05% 6.63% (10,761) (22,515) 775,619 1,120,808

Interest rate swap contracts exchanging fixed rate interest are designed and assessed as effective cash flow hedges.

The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve at the

reporting date plus an adequate credit spread, and were as follows:

%

The Consolidated Entity uses interest rate contracts in managing interest rate exposure, including interest rate swap contracts.

Under interest rate swap contracts, the Consolidated Entity agrees to exchange the difference between fixed and floating rate

interest amounts calculated on agreed notional principal amounts. Such contracts enable the Consolidated Entity to mitigate the

risk of changing interest rates. The Consolidated Entity enters into interest rate swap agreements for the sole purpose of

managing interest rate exposures in the statement of financial position and not for speculative purposes.

The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at

the reporting date:

5.5% - 15.9%

4.7% - 7.0%

4.0% - 6.0%

6.0% - 6.3%

4.9% - 6.2%

9.5% - 10.4%

4.7% - 5.7%

58

61

An

nu

al R

epor

t 20

11







k) Liquidity Risk

2011

$'000

Carrying

Amount

Expected

cash flow

6 months or

less6-12 months 1-2 years 2-5 years

More than 5

years

Holding Entity

Interest Rate Swaps

Assets 948 948 262 119 179 261 127

Liabilities (13,673) (13,673) (4,412) (4,340) (3,038) (1,191) (692)

Basis Swaps 2,354 2,354 152 153 296 725 1,028

(10,371) (10,371) (3,998) (4,068) (2,563) (205) 463

Consolidated

Interest Rate Swaps

Assets 324 324 324 - - - -

Liabilities (11,085) (11,085) (4,270) (4,021) (2,518) (276) -

Basis Swaps - - - - - - -

(10,761) (10,761) (3,946) (4,021) (2,518) (276) -

2010

$'000

Carrying

Amount

Expected

cash flow

6 months or

less6-12 months 1-2 years 2-5 years

More than 5

years

Holding Entity

Interest Rate Swaps

Assets 3,186 3,186 706 560 757 1,163 -

Liabilities (22,622) (22,622) (8,263) (6,013) (6,301) (2,045) -

Basis Swaps 5,034 5,034 990 925 1,242 1,877 -

(14,402) (14,402) (6,567) (4,528) (4,302) 995 -

Consolidated

Interest Rate Swaps

Assets 107 107 107 - - - -

Liabilities (22,622) (22,622) (8,263) (6,013) (6,301) (2,045) -

Basis Swaps - - - - - - -

(22,515) (22,515) (8,156) (6,013) (6,301) (2,045) -

The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to

occur.

59


An

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al R

epor

t 20

1162






l) Fair value hierarchy

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total

$'000 $'000 $'000 $'000

Available-for-Sale financial assets - 831,899 - 831,899

- 7,138 - 7,138

Derivative financial assets - 3,302 - 3,302

- 842,339 - 842,339

Derivative financial liabilities - (13,673) - (13,673) - 828,666 - 828,666


$'000 $'000 $'000 $'000


- 7,138 - 7,138

Derivative financial assets - 324 - 324

- 849,611 - 849,611

Derivative financial liabilities - (11,085) - (11,085) - 838,526 - 838,526


$'000 $'000 $'000 $'000


- 6,552 - 6,552

Derivative financial assets - 8,220 - 8,220

- 832,140 - 832,140

Derivative financial liabilities - (22,622) - (22,622)

- 809,518 - 809,518


$'000 $'000 $'000 $'000


- 6,552 - 6,552

Derivative financial assets - 107 - 107

- 829,286 - 829,286

Derivative financial liabilities - (22,622) - (22,622)

- 806,664 - 806,664

2010

Financial assets designated at fair value though profit or loss

Consolidated Entity


Holding Entity


2010

The table below analyses financial instruments carried at fair value, by valuation method for the Consolidated Entity. The

different levels have been identified as follows:

- Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities,

either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Consolidated Entity

Holding Entity


2011

2011

60

63

An

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42. BUSINESS COMBINATION

a) Savings & Loans Credit Union (S.A.) Limited

b) Separately recognised transactions

c) Identifiable assets and liabilities assumed

Pre-merger

carrying amount

Recognised

values on

merger

30-Nov 1-Dec

2009 2009

$'000 $'000

Assets

Cash and cash equivalents 24,098 24,098

Trade and other receivables 2,855 2,855

Current tax assets 1,200 1,200

Loans and advances

Gross value 2,813,959 2,821,074

Provision for impairment (2,619) (2,619)

Net loans and advances 2,811,340 2,818,455

Investments :

Available-for-Sale and other investment securities 353,485 350,399

Other investments 6,552 6,552

Property, plant and equipment 25,048 25,048

Deferred tax assets 12,650 15,063

Intangible assets - 19,910

Other financial assets - -

Other assets - -Total Assets 3,237,228 3,263,580

Liabilities

Deposits 2,293,692 2,296,781

Other financial liabilities 18,632 18,632

Trade and other payables 32,683 34,538

Borrowings 715,029 715,041

Notes payable - -

Deferred tax liability 1,875 9,983

Employee benefits 6,860 6,860

Subordinated debt 10,000 10,000Total Liabilities 3,078,771 3,091,835

158,457 171,745

Final fair value of identifiable net assets attributable to Savings & Loans Credit Union (S.A.)

Limited

On 1 December 2009, Australian Central Credit Union Ltd merged with Savings & Loans Credit Union (S.A.) Limited by way of a

voluntary Transfer of Business pursuant to the Financial Sector (Business Transfer and Group Restructure) Act of 1999 (Cth) .

Regulatory approval was obtained from the Australian Prudential Regulation Authority ("APRA") for the merger on 30 November

2009. The primary reasons for the merger were to provide a member-owned alternative to the major banks and create as a

direct result efficiencies and opportunities which will provide greater value, improved products and services as well as a broader

network of branches for members.

The merger, originally announced on 13 August 2009, was approved by both the members of Savings & Loans Credit Union

(S.A.) Limited and Australian Central Credit Union Ltd on 27 November 2009. The transaction was effective from 1 December

2009 with the transfer of the Savings & Loans Credit Union (S.A.) Limited assets and liabilities being legally undertaken on that

date.

The effective fair value of the identifiable assets and liabilities of Savings & Loans Credit Union (S.A.) Limited as at the date of

merger of 1 December 2009 were:

The Holding Entity incurred merger related costs of $5.003 million in relation to external consultancy, legal fees, redundancy and

due diligence costs. These costs have been separately disclosed in Note 6, and are included under "Other Expenses" in the

consolidated statement of comprehensive income.

61


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43. EVENTS SUBSEQUENT TO REPORTING DATE

44. IMPACT OF ADOPTING TAXATION OF FINANCIAL ARRANGEMENTS ("TOFA")

There has not arisen in the interval between the end of the financial year and the date of this report, any item, transaction or

event of a material and unusual nature likely, in the opinion of the Directors of the Holding Entity, to affect significantly the

operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future

financial years.

The Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 ("TOFA legislation") was enacted during the prior

year. The TOFA legislation provides a framework for the taxation of financial arrangements, potentially providing closer

alignment between tax and accounting requirements. The regime also includes comprehensive tax hedging rules that would

allow the tax recognition of gains and losses on many hedging instruments to be matched to the accounting recognition of gains

and losses of the underlying hedged items.

TOFA is mandatory for the Consolidated Entity for tax years beginning on or after 1 July 2010. There are specific transitional

provisions in relation to the taxation of existing financial arrangements outstanding at the transition date (i.e. there is a choice to

bring pre-commencement financial arrangements into the new regime subject to a balancing adjustment being calculated on

transition to be returned over the next succeeding four tax years).

The Consolidated Entity has assessed the potential impact of the changes on the Consolidated Entity's tax position. No impact

has been recognised and no adjustments have been made to the deferred tax and income tax balances as at 30 June 2011

(2010:$Nil).

62

65

An

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11



An

nu

al R

epor

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1166

Registered Office

Australian Central Credit Union Ltd ABN 11 087 651 125

AFSL/ACL 244310

60 Light Square Adelaide SA 5000

Telephone

13 11 82

Email

[email protected] [email protected]

Annual General Meeting

Friday, 28 October 2011 Sebel Playford Adelaide 120 North Terrace, Adelaide 11.00am (Central Daylight Saving Time)

Bankers

Cuscal Ltd National Australia Bank Limited

Auditors

KPMG

Tax Agent

KPMG

Solicitors

Fisher Jeffries Langes+

67

An

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People’s Choice Credit Union, a trading name of Australian Central Credit Union Ltd ABN 11 087 651 125 AFSL/ACL 244310

annual report 2011 - people's choice credit union · independent auditor’s report 12 - 13...

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